Should you buy, sell or hold Bajaj Finance after Q1 earnings? Here’s what brokerages say

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Goldman Sachs maintained a sell rating on Bajaj Finance with a target price of Rs 4,479 per share as the company's Q1 operating misses estimates due to difficult macro conditions and slow growth in franchise products.

Shares of Bajaj Finance rallied over four percent on Thursday after the company reported a 4.2 percent growth in consolidated net profit for the first quarter of FY22.
The non-banking finance company on July 20 posted a net profit of Rs 1,002 crore in Q1FY22 as compared to Rs 962 crore in the year-ago quarter. During the quarter, consolidated net interest income (NII) grew eight percent to Rs 4,489 crore from Rs 4,152 crore, YoY.
Loan losses and provisions for Q1FY22 increased by 3.8 percent to Rs 1,750 crore as against Rs 1,686 crore in Q1FY21, the company said in a regulatory filing.
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Here’s what brokerages have to say on Bajaj Finance’s stock and Q1 earnings:
Goldman Sachs
Goldman Sachs maintained a ‘sell’ rating on the stock with a target price of Rs 4,479 per share as the company's Q1 operating misses estimates due to difficult macro conditions and slow growth in franchise products.
While business transformation is in focus but competition is intense. In the near term, the company is facing another round of earnings downgrade, the brokerage said.
Morgan Stanley
The company has three Ps- profits, platform, and payments, that excite investors in ‘new age’ stocks, Morgan Stanley said.
The broking house cuts EPS forecast after weaker-than-expected Q1 earnings. The stock looks fairly valued versus its base case, it said.
It has an ‘overweight’ call with a target price of Rs 6,850 per share.
Citi
There was high stress, while decent early traction of wallet. The tech strategy will be less ‘burn to grow’ & more cross-sell to existing customers. Citi said.
The brokerage lowered FY22 / 23 earnings by 11 percent/3 percent. It has a ‘buy’ rating with a target of Rs 6,950.
Motilal Oswal
Despite the transitory deterioration in asset quality and resultant high credit costs, 1QFY22 was a decent quarter for BAF. Customer acquisitions and new loans booked were healthy even in a pandemic-disrupted quarter. COVID-related disruptions are known unknowns, and the quantum of impact on disbursements/asset quality is difficult to ascertain.
In the context of the strong recovery seen in Jul’21, we expect BAF to be able to deliver pre-COVID levels of quarterly run-rate in AUM growth for the remainder of FY22. Provided there is no new COVID wave, we expect BAF to contain credit costs at ~2.6% in FY22. Margins are likely to see a sharp improvement in FY22 on a) lower cost of funds, b) reduced liquidity, and c) a favorable base due to interest reversals.
Motilal Oswal maintained a ‘buy’ call with a target of Rs 6,750.
ICICI Direct
We remain positive and factoring in high NIMs with risk-adjusted growth we value the stock at 7.8x P/ABV on FY23E and revise the target price to Rs 6,900 from Rs 5,900 earlier. Premium valuations stay, ICICI Direct said.
Expect 20 percent, 22 percent advances growth for FY22E, FY23E, and PAT growth of 30 percent, 45 percent, respectively, and expect asset quality to stabilise post unlock by Q4FY22.
At 11:00 am, the shares of Bajaj Finance were trading 4.13 percent higher at Rs 6,183.40 apiece on the BSE.
 

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