Focus on consumer loans helps Bajaj Finance put up good show
The company is well-placed in the liquidity front, which will support its growth, Kotak Institutional Equities said.
Mumbai: Shares of Bajaj Finance gained over 6 per cent and touched a new 52 week high as its fourth quarter financial performance exceeded analysts' estimates.
Bajaj Finance shares touched a high of 3,314.95 in intra-day trade and finally closed with a gain of 6.09 per cent at Rs 3,301.20.
The stock has gained close to 10 per cent in the last two sessions from its share price of Rs 3,002.55, as it rallied by 3.63 per cent earlier on Thursday too after the company declared its fourth quarter performance.
Bajaj Finance reported fourth quarter net profit of Rs 1,176 crore up by 57 per cent from Rs 748 crore in Q4 of FY18.
Net Interest Income or NII (difference between interest earned and interest expended) for Q4 FY19 was up by 50 per cent to Rs 3,395 crore from Rs 2,265 crore in Q4 FY18.
Number of new loans booked during Q4 FY19 increased by 53 per cent to 58.3 lakh from 38 lakh in Q4 FY18, the company informed stock exchanges.
"Profit after tax (PAT) of Rs 11.6 billion exceeded our estimate by 11 per cent, led by a modest net interest income (NII, difference between interest earned and interest expended) beat and lower credit costs," brokerage house Motilal Oswal said.
"The quarter was characterized by continued strong AUM growth, stable sequential margins and healthy asset quality and we maintain our estimates with PAT growth of 24 per cent over FY19-21," Motilal Oswal said.
Kotak Institutional Equities said, "Bajaj Finance's strong performance with 41 per cent AUM growth and improving operating leverage driving 57 per cent growth in earnings and its concerted efforts to maintain high growth and profitability are undoubtedly commendable. However, the risks of an eventual consumer cycle are completely ignored by the street."
Bajaj Finance performed well despite the NBFC crisis due to company's focus on consumer loans rather than to corporate. Analysts said the company has sound management and promoters are financially strong, so there is no debt trap helping them get better valuation quarter after quarter.
The company is well-placed in the liquidity front, which will support its growth, Kotak Institutional Equities said.
According to Kotak Instituional equities the company had robust growth in consumer and rural finance with consumer businesses (39 per cent of total loans) were up 45 per cent yoy, mortgages (including loan against property) was up 43 per cent year on year, SME lending saw strong increase at 38 per cent yoy while commercial lending saw muted growth at 10 per cent yoy in fourth quarter. Developer loans are negligible at 4 per cent with about 150 relationships and per loans size of Rs 50.0 crore. Rural loans increased sharply at 69 per cent yoy on a low base as the company focuses on increasing penetration into newer geographies.