Bajaj Finance offers robust update for Q1, draws brokerage upgrades

Mumbai: Analysts tracking Bajaj Finance reiterated their bullish outlook after the Pune-based non-bank lender's first-quarter business growth update took the Street by surprise, prompting brokerage houses to upgrade their recommendations and raise their respective price targets.

Shares of Bajaj Finance rose as high as 8% to post their biggest single-day gain in nearly one year. The stock surged to near two-year high on Tuesday to close at ₹7,868 apiece on the NSE, up 7.3% from the previous close, extending its run of gains to six consecutive sessions.

CLSA raised EPS estimates by 5-6% and upgraded the stock to buy. The global brokerage expects the stock to rise another 15% from the current levels.

"Bajaj Finance reported very strong pre-quarter numbers for Q1FY24," said CLSA in a client note. "While expected 6-7% QoQ AUM growth, the company delivered 9%. New customer acquisition healthy and volume growth in disbursements a strong 34% YoY."

Morgan Stanley raised its price target which has the potential to deliver another 18% returns from the current levels.

"AUM growth of 9.2% QoQ, 32% YoY with value & vol growth & strong customer acquisition should dispel loan growth debate," Morgan Stanley told clients in a note. "Bajaj Finance has a strong credit track record; RoA is at a historical high. See this large liquid stock re-rating to 30x F25e P/E."

Bajaj Finance's new loans booked during Q1 grew by 34% to 9.94 million as compared to 7.42 million in the corresponding quarter of the previous year. Assets under management (AUM) grew 32% YoY - the highest-ever quarterly increase - to ₹2.7 lakh crore.

The customer franchise stood at 72.98 million at the end of June 2023 as compared to 60.30 million as of June 2022 after seeing the highest-ever quarterly increase.

BofA Securities also raised its price target. It said the first quarter update should also reinforce confidence in its long-term growth guidance of 25-27%. "The company is on track to beat the upper end of its 11-12 million customer acquisition guidance comfortably," the firm said.