Bajaj Finance, Macrotech Developers, IndusInd Bank, Cyient, Zensar Q4 Results Review: HDFC Securities
Bajaj Finance reported a mixed set of earnings with robust AuM despite a regulatory embargo on select products, offset by sharp NIM compression, elevated credit costs
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HDFC Securities Institutional Equities
Bajaj Finance - operating efficiencies to offset margin pressure
Bajaj Finance Ltd. reported a mixed set of earnings with robust assets under management (+34% YoY) despite a regulatory embargo on select products, offset by sharp net interest margin compression (21 bps) and elevated credit costs (1.6% annualised).
While the regulatory embargo led to muted traction in customer acquisitions and loan volumes, a shift towards secured assets helped drive loan growth. On the back of its omnichannel strategy, the widest product suite and focus on cross-selling, we believe Bajaj Finance is poised for ~23% AUM compound annual growth rate over the medium term, while also simultaneously delivering steady profitability.
We tweak our earnings by 2-4% for FY25E-FY26E to reflect the management guidance of NIM compression and higher credit costs for FY25; maintain Buy with a revised RI-based target price of Rs 8,810 (implied 27 times FY26 earnings per share; 4.9 times March-26 adjusted book value per share.
Macrotech Developers - Strong performance
Macrotech Developers Ltd. reported strong quarterly presales of Rs 42.3 billion (+40/24% YoY/QoQ), with a presales volume of Rs 3.3 million square feet (+32/+27% YoY/QoQ). Average price realisation stood at Rs 12,818 (+6/-2% YoY/QoQ). MMR/Pune/Bengaluru market saw presales of Rs 109.2/18/12 billion. Collections were Rs 35.1 billion (29/36% YoY/QoQ).
The embedded Ebitda margin on presales was ~30%. Macrotech Developers has provided annual presales guidance of Rs 175/210 billion for FY25/26.
In terms of launches, Rs 121 billion worth of launches are planned for the rest of FY25 with a saleable area of 10 msf. In terms of price hikes, since April 2023, Macrotech Developers has hiked prices by 5.5% and expects price appreciation of 6-7% for FY25.
Moreover, Macrotech Developers is also planning a luxury project in Palava which would help the developer gain better realisations. Given robust growth visibility, better-than-expected gross development value addition and uptick in land prices (Palava may see price and volume increase as new infra projects get commissioned over the next few years), we increase our target price to Rs 1,311/share. Owing to the limited upside target price, we maintain our Add rating.
IndusInd Bank - Steady-state quarter; deposit mobilisation remains key
IndusInd Bank Ltd. reported stable earnings, led by strong loan growth (+18% YoY) and stable net interest margins (4.3%). Deposit growth (+14% YoY) lagged loan growth, coupled with a drop in the share of retail deposits, as the liquidity coverage ratio dropped 400 bps QoQ to 118%.
Current account and savings account fell 60 bps QoQ to 37.9%, contrary to what was witnessed by larger peer banks, showcasing sluggish sequential CASA accretion.
Annualised credit costs remained elevated at 111 bps (Q3 FY24: 119 bps) as net slippages were at 1%, with improvement in gross slippages (1.8%), offset by lower recoveries and upgrades in the corporate segment.
We expect medium term opex ratios to stay elevated as the bank frontloads its investments in digital build-out, capacity building and distribution.
With a further drawdown (Rs 3 billion) from its contingency provisions, we believe IndusInd Bank needs to ramp up its provisioning buffer. We tweak our FY25E and FY26E earnings estimates, factoring in steady margins; maintain Reduce with a target price of Rs 1,420 (1.4 times Mar-26 ABVPS).
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