This NBFC Giant's Q3FY24 Earnings Miss Street Estimates, But Analysts Remain Bullish In The Long Run

In the September to December quarter where expectations were high, Bajaj Finance faced a setback as its Q3 earnings fell short of Street estimates, causing its shares to dip. However, leading brokerages remain optimistic about the non-banking financial giant's future, citing strong asset quality and promising assets under management (AUM) growth.

Bajaj Finance reported a consolidated net profit of Rs 3,639 crore for Q3FY24, marking a 22% YoY growth. Although this fell short of the street expectations, analysts argue that the performance is well within the company's guided range.

Total net income also saw a 25% YoY increase, reaching Rs 9,298 crore. The net interest income (NII) surged by 29% YoY to Rs 7,655 crore, and the number of new loans booked witnessed a robust 26% YoY growth, totalling 9.86 million during the same period.

On January 29, Bajaj Finance shares closed 1.6% higher at Rs 7,200 on the National Stock Exchange (NSE). Despite this, the stock has experienced a 5% cut, trading at Rs 6,867 per share as of 11:45 am on NSE, reflecting a mixed market sentiment.

Despite the quarterly earnings missing estimates, major brokerages continue to recommend a 'buy' on Bajaj Finance, emphasizing the company's long-term growth potential.

HSBC issued a 'buy' call on Bajaj Finance with a target price of Rs 8,900 per share. The brokerage acknowledges the Q3 earnings falling short due to reduced fees and increased credit costs. However, it remains optimistic about the stock, citing stable asset quality and strong AUM growth in the future. HSBC has slightly lowered its earnings per share (EPS) estimates for FY24-26 to accommodate slower loan growth and decreased fees.

Nomura maintains a 'buy' rating on Bajaj Finance, setting a target price of Rs 8,800 per share. The brokerage notes that Q3 results were in line with expectations, with a slight deterioration in asset quality. Nomura highlights strong growth in assets under management (AUM) across segments, excluding rural business-to-consumer (B2C) operations. Despite an increase in credit costs and stress in unsecured segments, Nomura emphasizes that Bajaj Finance's performance remains within the guided range.

Jefferies is bullish on Bajaj Finance, issuing a 'buy' call with a target price of Rs 9,400 per share. The brokerage attributes its optimism to strong AUM growth and improved net interest margins (NIMs), contributing to a rise in NII. However, Jefferies acknowledges disappointment in asset quality, primarily due to slippage in personal loans. Additionally, it notes the ongoing embargo on Emicard and anticipates Bajaj Finance submitting revised standards to the Reserve Bank of India (RBI) in the fourth quarter.

Despite the challenges highlighted by brokerages, Bajaj Finance Managing Director Rajeev Jain has affirmed his commitment to actively shaping the company's strategy. The management remains focused on navigating through the hurdles and capitalizing on the robust aspects of the business.

Looking ahead, analysts believe that stable asset quality and strong AUM growth will be pivotal in driving Bajaj Finance's future earnings. As the company addresses concerns about credit costs and asset quality, investors are urged to consider the broader, long-term potential of the NBFC.