Bajaj Finance rallies 13% in two days on healthy June quarter results

Thus far in the month of July, the market price of Bajaj Finance has appreciated 27 per cent, as compared to 6 per cent rise in the S&P BSE Sensex

Shares of Bajaj Finance gained 9.4 per cent to Rs 6,999 on the BSE in Thursday’s intra-day trade, surging 12.7 per cent in two days, after the company reported 159 per cent year-on-year (YoY) jump in its consolidated net profit to Rs 2,596 crore for the quarter ended June 2022 (Q1FY23).

Thus far in the month of July, the market price of Bajaj Finance has appreciated 29.6 per cent, as compared to 6.8 per cent rise in the S&P BSE Sensex.

The strong profit growth was aided by strong net interest income (NII) growth, and lower loan losses and provisions. The consumer financier had earned net profit to the tune of Rs 1,002 crore in the year-ago quarter (Q1FY22).

NII of the lender was up 48 per cent at Rs 6,638 crore in Q1FY23, compared with Rs 4,489 crore in the year-ago period, as loans booked in the quarter jumped 60 per cent YoY to 7.42 million.

On a standalone level, the lender’s net profit grew 179 per cent YoY to Rs 2,356 crore, compared with Rs 843 crore in the year-ago period. NII was up 48 per cent YoY to Rs 6,140 crore.

The asset quality of the lender improved as gross non-performing assets (NPAs) stood at 1.25 per cent, down 35 basis points (bps) sequentially. Net NPAs were down 17 bps sequentially to 0.51 per cent.

Asset under management (AUM) growth also gained traction as Core AUM was up 31 per cent YoY at Rs 2.04 trillion primarily driven by Consumer B2B and Rural consumer B2B. Customer franchise stood at 60.30 million as of Q1FY23.

"Bajaj Finance is comfortable to add 9-10 million new customers in FY23. Led by strong Asset Liability Management (ALM), management expects the impact of recent interest rate hikes on cost of funds will be gradual. The company is well on track to get transformed into an adaptable new age fin-tech. Improvement in asset quality with high profits enabling provisions & w/off under check are positive," ICICI Securities said in a note.

Bajaj Finance continues to deliver stronger than peer-group growth as well as profitability. Moreover, even if there is some moderation in NIMs due to rise in funding costs, it could get compensated by potential for operating efficiencies, analysts at Jefferies added.

"We believe that these would support its premium valuations. We see 27 per cent CAGR in profit over FY23-25 (FY23 will grow fast on low base) and maintain our Hold rating with target price of Rs 7,300 (earlier Rs 7,600) based on 6.6x Jun-24 adjusted PB," the brokerage firm said in its result update.

Technical View

Bias: Neutral

Support: Rs 6,325

Resistance: Rs 7,500

With today's over 9 per cent surge, the stock price of Bajaj Finance has crossed the 200-DMA (Daily Moving Average) for the first time since April 27, 2022. The stock is now trading above the 50-WMA (Weekly Moving Average), placed at Rs 6,885, for the first time since April 18, 2022.

The momentum oscillators, both, on the daily and weekly charts are clearly in the favour of the bulls, albeit in the overbought territory on the daily chart.

However, the price-to-moving averages action is slightly negative, as the short-term 20- and 50-DMAs, placed at Rs 6,025 and Rs 5,835, respectively, are significantly below the long-term 100-DMA and 200-DMAs, placed at Rs 6,278 and Rs 6,770, respectively.

In the near term, sustenance above the 200-DMA could augur well for the stock, with a possibility of the rally stretching towards Rs 7,500-mark. On the downside, the stock has near support at Rs 6,884, below which Rs 6,325 is likely to act as a significant support.

(With inputs from Rex Cano)