Brokerages Cautiously Optimistic On Bajaj Finance After Q1 Earnings Beat Estimates

Bajaj Finance Ltd. got a thumbs-up from brokerages after the non-banking financial company’s June quarter earnings beat street estimates on almost all fronts. The Pune-based lender reported a 42 percent jump in the first quarter net profit led by strong growth in its core business.

Here's what brokerages are saying about Bajaj Finance post earnings:

Credit Suisse

• Rating: Maintains Underweight
• Price Target: Hiked to Rs 1,000 from Rs 960
• Six percent profit miss due to higher credit costs and operating expenditure
• Lack of operating expenditure leverage is a noticeable trend, despite strong growth and perception of evolved technology usage
• Management expects operating expenditure to stay high due to investments in growth and technology
• Growth led by unsecured business and lack of margin expansion a worry
• Net interest margin should decline as management maintains that growth will be driven by secured businesses for the long-term
• Management sounded caution about unsecured business loans due to rising competition and signs of portfolio stress

Jefferies

• Rating: Maintains Buy
• Price Target: Hiked to Rs 1,790 from Rs 1,600
• Believe strong loan growth, coupled with lower funding cost, operating leverage gains and stable credit costs should drive 38 percent earnings per share (EPS) compound annual growth rate (CAGR) over FY17-19E
• Valuations are at a premium, but these premium multiples may sustain given solid growth and lack of any visible de-rating triggers
• Lift FY18-19E EPS by 2-6 percent factoring higher NIM, higher cost to income and higher provision in FY18
• Key risks are slower loan growth, higher asset quality issues and higher funding costs

Goldman Sachs

• Rating: Maintains Buy
• Price Target: Hiked to Rs 1,700 from Rs 1,559
• Assets under management remain strong on the back of consumer-oriented product lines
• Second quarter expected to remain sluggish due to the new tax rollout
• Expect company to deliver a strong 34 percent AUM CAGR over FY17-20E
• While overall asset quality remained healthy, credit costs remains elevated as the company booked Rs 25 crore out of the Rs 80 crore pool of demonetisation related provisions this quarter

Motilal Oswal

• Rating: Maintains Buy
• Price Target: Hiked to Rs 1,800 from Rs 1,600
• Management anticipates hit of about Rs 30-40 crore for the two-wheeler portfolio over the next two quarters
• Company continues to reap the benefits of healthy consumer demand
• It is proactive in detecting early warning signals with regard to asset quality
• Raise FY18E/19E EPS by 1-2 percent