Bajaj Finance Ltd's recent Q2 results have left analysts with mixed views on the stock's future performance, with target prices ranging from Rs 7,400 to Rs 10,000. Let's delve into the details and factors that are shaping these diverse predictions.
Bajaj Finance reported an in-line performance for the September quarter. Analysts are generally optimistic about the stock, highlighting its robust capitalization and liquidity position, making it well-prepared to capitalize on the upcoming credit cycle.
However, some differences in opinion emerged. While the net interest income (NII) showed a slower growth rate in Q2 compared to the growth in assets under management (AUM), the operating leverage came into play, contributing to healthy profitability.
Nirmal Bang Institutional Equities expressed confidence in Bajaj Finance's future prospects. The brokerage revised its FY24 estimates slightly and increased FY25E profit after tax (PAT) by 5%, driven by strong growth in net interest margin (NIM) and operating leverage. Based on a target price (TP) derived from a multiple of 5.3 times the September 2025 estimated adjusted book value (ABV) of Rs 1,781, Nirmal Bang set a target price of Rs 9,520, representing an 18% upside potential.
InCred Equities pointed out Bajaj Finance's plans to raise Rs 8,800 crore in equity to support its next phase of growth. This expansion includes entering new lending areas and enhancing penetration in current regions. The brokerage increased its earnings estimates for FY25 by 9.2% and for FY26 by 8.1%, raising the target price to Rs 9,850 from Rs 9,000.
PhillipCapital placed a target price of Rs 10,000 on Bajaj Finance, citing the company's resilient performance through various market cycles. A diversified funding base, AAA rating, positive asset-liability management (ALM) in less than one-year buckets, and a high-quality loan book make it an attractive investment. PhillipCapital emphasized Bajaj Finance's credit cost management and expects a growth rate exceeding 25% in FY24, FY25, and FY26.
Motilal Oswal Securities valued the stock at Rs 9,600. It stressed the significance of Bajaj Finance's payments landscape evolution and the adoption of its payment offerings. Additionally, they are closely monitoring the degree to which NIM compression can be offset by operating leverage, leading to a decrease in cost ratios.
On the other hand, Kotak Institutional Equities has maintained a 'Reduce' rating on the stock. While acknowledging the positive macro environment and Bajaj's aggressive franchise expansion, they expressed concerns about increasing funding costs. The brokerage factored in a proposed capital issuance and raised its fair value estimate to Rs 7,400 from Rs 6,800.
In conclusion, Bajaj Finance's Q2 performance has drawn mixed responses from analysts, showcasing a range of target prices from Rs 7,400 to Rs 10,000. The stock's future will likely be influenced by factors such as its credit cost management, cost ratios, and the evolving payments landscape. Investors should carefully consider these diverse opinions when evaluating Bajaj Finance's investment potential.