Brokerages maintained a positive view on the stock after encouraging management commentary.
The share price of Bajaj Finance rose over 2 percent on Thursday despite a sharp decline of 36 percent in Q2 net profit YoY as brokerages maintained a positive view on the stock after encouraging management commentary.
The stock rose as much as 2.3 percent to Rs 3,307.35 per share on the NSE. However, the stock pared some gains to trade 1.21 percent higher at Rs 3,272 apiece, at 11:26 am.
The company reported a rise in net interest income (NII) by 4 percent at Rs 4,165 crore against Rs 4,000 crore, YoY.
Asset quality remained stable during Q2FY21 as gross non-performing assets (NPA) were eased to 1.03 percent from 1.4 percent in the previous quarter while net NPA declined to 0.37 percent from 0.50 percent, QoQ.
In a regulatory filing, the company said that it has further increased its provisions on stage 1 and 2 assets by Rs 1,370 crore to Rs 5,099 crore as of September 30, 2020, as against Rs 3,729 crore as of June 30, 2020. The company has strong pre-provisioning profitability to manage loan losses arising out of COVID-19
Brokerages maintained their positive view on the company. Motilal Oswal maintained 'neutral' call on the stock with a target price at Rs 3,350.
"We expect BAF to deliver 6 percent YoY AUM growth in FY21, followed by 20 percent YoY growth thereafter. Our operating profit estimates are largely
unchanged. With the economic scenario improving, we cut our FY22
credit cost estimate by 100bps to 2.25 percent v/s management guidance of
normalized levels of 1.7–1.8 percent," said the report.
The brokerage believes that the company reported an in-line quarter on all fronts. With the onset of the festive season, there could be an improvement in disbursements and spreads. The management is also very clear that the company would take all the possible asset quality impact in FY21 itself, it added.
Nirmal Bang retained an 'accumulate' rating on the stock with a target price placed at Rs 3,564.
It said, "The company is confident of regaining market share and reach 70 percent among the OEMs in the near term on the back of enhanced volume push and new customer acquisitions. We continue to like the structural play BAF has to offer on India’s consumerism."
Given the strongest balance sheet in the NBFC space, it expects NIMs to improve as volume normalizes. Provisioning will be front-loaded in FY21 but will normalize in FY22, added the brokerage report.
Meanwhile, Axis Securities maintained a 'hold' rating on the company with a target price at Rs 3,297.
According to Axis, management capability will help in navigating the current crisis. Improved C-I and fee income will aid profitability. Cost control measures and NIM should support profitability even as AUM growth lags in FY21.