After Q4FY22 results, Bajaj Finance shares dropped 5%. Should you buy, hold, or sell?


Bajaj Finance Q4FY22:Despite reporting a robust increase in net profit of 80% year over year (YoY) at Rs 2,420 crore for the fourth quarter that ended in March 2022, Bajaj Finance shares fell 5% in Wednesday's trades to Rs 6,855 on BSE in intra-day trade (Q4FY22).


Due to increased net interest income and fewer provisions, Bajaj Finance yesterday announced a consolidated net profit increase of 79.7% year-over-year (y-o-y) to Rs 2,420 crore. In the March quarter, Bajaj Finance's net interest income (NII) increased 30% year over year to Rs 6,068 crore.

Fees and other income, which totaled Rs 1,164 crore and increased by 51% from the same time the previous year, made up the other significant portion of its sales. On a consolidated basis, the company's total AUM increased 29% to Rs 1.97 trillion as of March 31. Bajaj Housing Finance Ltd.'s book, which is included in the consolidated figures, was worth Rs 53,322 crore during the same period.

Bajaj Finance: Should You Buy, Sell or Hold The Stock?

Brokerage firm Motilal Oswal reported that Bajaj Finance had a strong fourth fiscal year with overall progress in all significant business metrics. The trajectory for new loans and customer additions are both quite robust. With its digital ecosystem, which includes an app, a web platform, and full-stack payment options, this momentum will only continue to grow.

"Over the next two years, we anticipate BAF to generate a healthy AUM CAGR of 25%. In FY23, we anticipate it to keep credit expenses at 1.7%. NIM compression is likely in FY23, even if management has said that it will prioritize margin over loan growth, as drivers like normalization in excess cash and borrowing costs have mostly played out. The competitive environment is also still very hostile.

To account for probable NIM compression and a higher OPEX ratio of 35% over the following two years, we reduced our PAT estimates for FY23 and FY24 by 4% each. Over the medium term, the company should produce an RoA/RoE of 4.2–4.4%/21–22%. With a target price of Rs. 8,350 per share (8x FY24E BVPS), we retain our buy recommendation, according to Motilal Oswal.


Due to a 6% NII miss, Bajaj Finance fell 9% short of CLSA's Q4 PAT projections. Over the past year, the brokerage firm has drawn attention to the widening gap between Bajaj Finance's value and that of top-tier banks, particularly in light of the company's declining growth outperformance. "We reduced our expected PAT for FY23/24 by 8%/9% and our target price from Rs. 6,500 to Rs. 6,000. Given a high valuation, we keep a Sell rating. In the area of large-cap lending, it advised investors to migrate to private sector banks.

Bajaj Lending, according to ICICI Direct analysts, is a market leader in consumer finance, and because the fin-tech narrative is ingrained in this company's operations, values should continue to remain high. "The new strategy in FY23 is the digital online platform, which functions similarly to the app. We increase PAT projections by 17.8% for FY24, the authors wrote. When initial cashback is seen as part of operating expenses with no impact on profit, digital transformation with strong client additions and wallets is projected to enhance profitability. The brokerage firm believes that Bajaj Finance's core business has promise and is on track to evolve into a flexible new-age fin-tech. There are no immediate intentions to change to a bank. With a target price of Rs 9,500 per share, it retains a "buy" rating on the company, indicating a potential appreciation of 31% over the next 12 months.


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