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What is fueling a rally in Bajaj Finance post Q1? Here’s what brokerages say

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rallied more than 9 per cent in the morning trade on Thursday, a day after this NBFC company reported a 159 per cent year-on-year (YoY) growth in the net profit for the quarter ended June 2022.

Brokerage firms upgraded the stock post-June quarter results on strong loan growth and improvement in net interest margins (NIMs).

The stock picked up momentum in June after hitting a low above Rs 5200 levels. Since then, the stock has been making higher highs and higher lows on the daily charts.

It rose more than 14 per cent in a week ahead of results, and more than 23 per cent in a month, data from Trendlyne showed.

Investors who missed out on the rally can look to buy the stock now or on dips for a possible target above Rs 8,100-8,500 levels which could take the stock to a fresh record high.

Bajaj Finance reported a 159 per cent year-on-year (YoY) rise in consolidated net profit at Rs 2,596 crore, its highest ever, for the June quarter compared with Rs 1,002 crore in the same quarter last year.

Net interest income, the NBFC said, jumped 48 per cent YoY to Rs 6,638 crore from Rs 4,489 crore in the corresponding quarter last year.

The NBFC said new loans booked for the quarter rose 60 per cent to 7.42 million against 4.63 million in the year-ago quarter.
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We have collated a list of recommendations from various brokerage post Q1 results:

JPMorgan: Buy| Target Rs 8500| Upside 30%
The global brokerage firm upgraded Bajaj Finance to Overweight from Neutral post-June quarter results with a target price of Rs 8,500 which translates into an upside of over 30 per cent from Rs 6,393 recorded on 27 July.

Q1 print delivered a 10% beat on JPMorgan estimates. The net interest margins (NIMs) are also improving which is a positive sign for the stock, it said.

“Valuations on a P/E basis are at a premium to the banking sector. Company’s ROE/EPS growth is higher than other quality lenders,” ETNow quoted JP Morgan as saying.

YES SECURITIES: Buy| Target Rs 8140| Upside 27%
YES Securities maintained its buy rating on Bajaj Finance for a target price of Rs 8,140 which translates into an upside of 27 per cent from Rs 6,393 recorded on 27 July.

Core AUM growth and customer franchise addition were reasonably strong while asset quality improved across products, underpinning moderate credit cost, the brokerage said.

“NII growth/NIM movement was on expected lines, but CoF reduction was a surprise. The FY23 guidance on every metric is encouraging viz. a) co. is confident of adding 9-10 million new customers, b) NPL levels expected to further come down and credit cost estimated at 1.35-1.45% of avg. assets, c) NIMs to be maintained with the gradual rise of CoF and lending rates hikes and d) Opex/NII to start tapering from H2,” it said.

Bajaj Finance is looking to double its AUM over the next three years (26 per cent CAGR) while maintaining its return metrics, YES Securities noted.

“We see BAF delivering 4.5-4.6 per cent RoA and 23-24 per cent RoE over the next two years. Earnings estimates have seen some upgrade, but we have moderated the target multiple to reflect eventual conversion into a bank,” said the note.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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