Bajaj Finance Q4 Results Review - Staring At A Weaker Year Ahead; Downgrade To Neutral: Motilal Oswal

Motilal Oswal Report

Bajaj Finance Ltd.’s Q4 FY24 reported profit after tax grew ~21% YoY to ~Rs 38.2 billion (in line), while FY24 PAT rose ~26% YoY to Rs 144.5 billion.

Net interest income grew 28% YoY to ~Rs 80.1 billion (in line). Non-interest income was up 12% YoY, and net total income rose 25% YoY to ~Rs 97.1 billion (in line).

Bajaj Finance’s Q4 FY24 NIM (calculated) contracted ~20 bp QoQ to ~10%.  While the change in the assets under management mix will be gradual, the AUM growth in FY25 will be supported by mortgages, commercial, SME, and newer product segments such as cars, loan-against-property, and tractors. Higher growth in the secured product segments will keep yields under pressure. Further, we expect its CoB to increase for a large part of FY25.

We have cut our FY25/FY26 PAT estimates by 7%/6% to factor in a higher NIM compression, a decline in fee income, and elevated credit costs.

We model an AUM/PAT CAGR of ~27%/25% over FY24-FY26 and expect Bajaj Finance to deliver an return on asset/return on equity of ~4.3%/22% in FY26.

Downgrade the stock to Neutral with a target price of Rs 7,800 (premised on 4.3 tims FY26E price/book ).

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