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What should investors do with Bajaj Finance: buy, sell or hold post Q2? – Moneycontrol.com

NBFC major Bajaj Finance share price rose 2 percent in early trade on October 22 a day after the company declared its September quarter numbers.

On October 21, the company reported a huge 36 percent decline in consolidated profit for the quarter ended September 2020 due to elevated provisions.

Profit fell to Rs 965 crore during the quarter, down from Rs 1,506 crore in same period last year.

Consolidated net interest income increased 4 percent to Rs 4,165 crore in Q2 FY21 year-on-year, which was better than the CNBC-TV18 poll estimates of Rs 3,711.7 crore.

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Also Read – Bajaj Finance Q2 profit declines 36% to Rs 965 crore, NII growth beats estimates at 4%

Here is what brokerages have to say on the stock:

Motilal Oswal

Bajaj Finance reported an in-line quarter on all fronts. A cautious stance on disbursements led to flattish AUM on a sequential basis. While this stance would continue for certain products going forward, Motilal Oswal expects disbursements to see healthy improvement M-o-M from Q3 FY21 with the onset of the festive season.

Performance on spreads is encouraging and is expected to improve in FY22 as COF would decline and the impact of negative carry on excess liquidity would start abating. Performance on fee income surprised in 1H FY21, and with an expected uptick in disbursements, broking house expect continued performance. It reduced FY22 credit cost estimate to 2.2% (from 3.3%), resulting in an upgrade in FY21/FY22E EPS estimates by 6%/15%. Maintain Neutral, with a target price of Rs 3,350 (4.2x Sep’ FY22 BV).

Sharekhan

Sharekhan believes the pandemic’s impact is still unfolding and is different for different players/segments. For company, rise in flexi Loans, the cautious stance on growth etc. indicate that management expects near-term headwinds to continue, even though the long-term outlook has improved (liquidity drag to reduce, growth to return in Q1FY2022E).

Given the company’s strong balance sheet and business strengths, Sharekhan believes the company is structurally a 20+% ROE business franchise in a normalised steady-state basis. It has introduced FY2023E estimates in this note and fine-tuned our estimates for FY2021E and FY2022E and maintain a buy rating on the stock with an unchanged price target of Rs 3,800.

Prabhudas Lilladher

The company missed Q2 FY21 earnings estimates on account of one-offs, viz; (a) Rs13.7bn COVID provisions on Stage 1/2 assets (b)excess BS liquidity (carrying costs of Rs2.2bn (c) interest income reversals of Rs1.4bn.

Prabhudas Lilladher believes that it’s a matter of time that BAF chooses to accelerate business volumes and forego conservatism stance.

The target price stands at Rs 3,805 (earlier Rs 3,813) with a buy rating.

Kotak Institutional Equities

The research firm has maintained reduce rating with a price target at Rs 3,000 per share. According to the firm, the performance seems to be broadly tracking its guidance and maybe well-placed for a normalised FY22 unless slippages disappoint.

All the positives, however, are already reflected in the current valuations and will wait for better entry points as current valuations are rich.

At 09:24 hrs Bajaj Finance was quoting at Rs 3,278.35, up Rs 45.50, or 1.41 percent on the BSE.