Bajaj Finance’s Journey From 52-Week Low To All-Time High

Shares of Bajaj Finance Ltd. have recovered nearly threefold from their 52-week low to hit an all-time high as investors derived optimism from the non-bank lender’s bullish business outlook and focus on controlling costs.

The stock, which had hit a 52-week low of Rs 1,783 apiece on May 27 amid the Covid-19 pandemic, rose as much as 2% in Wednesday’s trade, extending the rally for the fourth straight session, to Rs 5,225 apiece—a record high.

“In these unprecedented times, the company is focussed on capital preservation, balance sheet protection and operating expenses management,” Bajaj Finance had said in its investor presentation in May. The motive only got stronger as the company’s now focussed to get back to pre-Covid growth rates by March 2021. The growth, according to its analyst meet in November, in the recent festive season has been better than anticipated. Bajaj Finance also intends to target 3-3.5% of the total credit in India over the next four-five years.

According to ICICI Direct, given lower moratorium and a meager restructuring to date, return ratios are well placed to witness an improvement ahead. “The stock valuations look reasonable for long-term earnings growth guidance of 23-24%,” the brokerage had said in an October note.

Bajaj Finance’s overall moratorium book stood at 15.7% of the total assets under management as of June compared to 27.1% of the total AUM as on April 30. That further reduced to 8% as of September.

Analyst Views & The Rally

As of May 6, 68% of the analysts tracking Bajaj Finance had a ‘buy’ rating, 19% suggested ‘hold’ and 13% recommended a ‘sell’. Since then, the ‘sell’ calls have doubled to 25%, while ‘buy’ ratings fell to 47%—less than 50% for the first time since 2017. Yet, the stock rallied nearly 45% in June, 15% in July and 7.3% in August. While it fell 6% in September, the scrip again recovered nearly 49% in November.

In absolute terms, of the 32 analysts tracking Bajaj Finance, 15 have a ‘buy’ rating, nine suggest a ‘hold’ and eight recommend a ‘sell’. The stock is trading 28.7% higher than its 12-month Bloomberg consensus price target of Rs 3,703.9 apiece. Of the 32 analysts, only ICICI Direct and Morgan Stanley now have a price target that’s higher than the stock’s current market price.