Bajaj Finance is witnessing a classic clash between the bulls and the bears following the non-banking financial company's (NBFC) Q2 performance. The company's consolidated net profit for the September quarter surged by 28% year-on-year (YoY) to ₹3,551 crore, slightly below Street estimates.

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In the bullish camp, analysts from Jefferies, CLSA, and HSBC advocate for Bajaj Finance while Goldman Sachs and Macquarie remain bearish. Despite intraday fluctuations, Bajaj Finance shares rebounded and closed nearly 1% higher at ₹8,097.50 on the NSE on Tuesday.

Jefferies maintained a 'buy' call on Bajaj Finance stock with a revised target price of ₹9,470. HSBC also echoed a 'buy' rating, revising the target to ₹9,620 from ₹9,500. Macquarie rated the stock as 'underperform' with a target of ₹6,300, while Goldman Sachs issued a 'Sell' rating and set a target of ₹7,205.

These target prices, however, hint at an upside potential of up to 18.8% from Tuesday's closing stock price.

According to Jefferies, the NBFC's profit was strong but marginally below expectations. The growth in assets under management (AUM) by 33% is robust and widespread. However, the AUM growth in rural sales finance and rural B2C business was sluggish due to corrective measures taken by the company.

Jefferies also noted that Bajaj Finance's entry into new segments is contributing to the growth. Despite a possible net interest income (NII) compression over the next few quarters, Jefferies predicts that stronger growth and operating leverage will offset this.

HSBC emphasised that Q2 loan growth was widespread, maintaining a positive profitability outlook. They raised the NBFC's FY24-26e earnings per share (EPS) estimates by 0.1-2.5% to reflect a more optimistic AUM growth outlook. The brokerage highlighted the company's clarification that it does not have immediate inorganic lending aspirations in the near to medium term.

In contrast, Goldman Sachs said that Q2 was a mixed bag with loan growth and operating efficiency positive while loan book composition, NIMs and slightly higher credit cost as negative.

The proposed capital raise of ₹10,000 crore (₹8,800 crore of QIP and ₹1,200 crore of preferential issue of warrants) would be utilised for organic growth and to infuse capital in the housing subsidiary, which is required to be listed after eight quarters, as per the management, GS said.

This would likely increase EPS and book value per share in FY24 by 0.3% and 14%.

Global brokerage Macquarie has reiterated underperform due to expensive valuations. It said that FY24 growth guidance remains at 29-31%, and the management remains conservative on personal loan growth. "NIM compression will continue," Macquarie noted.

Tech view

In terms of technicals, the day RSI (14) is at 65.1. The RSI below 30 is considered oversold and above 70 is overbought, as per data from Trendlyne. Day moving average convergence/divergence (MACD) signal is at 172.9, which is above its centre and signal Line, this is a bullish indicator.

The counter has a one-year beta of 1.1, indicating high volatility during the same period. Shares of Bajaj Finance are trading lower than 5 Day and 10 Day moving averages, but higher than 20 Day, 50 Day, 100 Day, 150 Day and 200 Day moving averages.

Data from Trendlyne suggests long-term price targets for Bajaj Finance. The NBFC has an average target of 8,274.67. The consensus estimate represents an upside of 3.26% from the last price of Rs 8,013.25.

(With inputs from Abhishek Kothari)

(Edited by : Akanksha Upadhyay)

First Published:Oct 18, 2023 9:15 AM IST