What should investors do with Bajaj Finance shares post Q4 results? 

Shares of Bajaj Finance declined over five per cent to hit an intraday low of Rs 6855.45 on BSE in early trade on Wednesday after the company reported earnings for the quarter ended March 2022. 

The company reported the highest ever consolidated net profit at Rs 2,420 crore for the quarter ended 31 March, 2022, an 80 per cent surge year-on-year. It had reported a net profit of Rs 1,346 crore in the year-ago period. 

Bajaj Finance's net interest income (NII) increased 30 per cent to Rs 6,068 crore from Rs 4,659 crore in Q4FY21.  

The company's assets under management came at a record Rs 197,452 crore including IPO financing receivables of Rs 5,365 crore, up 29 per cent Y-o-Y from Rs 152,947 crore in Q4FY21. Core AUM growth came in at Rs10,837 crore. 

Read more: https://www.businesstoday.in/latest/corporate/story/bajaj-finance-reports-record-consolidated-pat-at-rs-2420-cr-in-q4-declares-dividend-331338-2022-04-26

The stock opened a tad lower at Rs 7,100 against the previous close of Rs 7,240.70. With a market capitalisation of Rs 4,16,825 crore, the shares stand lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. 

HDFC Securities noted that Bajaj Finance’s (BAF) Q4FY22 earnings were in line with the estimates, led by improving asset quality (credit costs at 160bps), partially offset by elevated opex. Core AUM growth (ex-IPO financing) remained strong at 26 per cent Y-o-Y despite marginal softness in new customer additions and new loans disbursed. 

"We make marginal upward tweaks to our FY23/FY24 earnings estimates (one per cent each) to factor in lower credit costs and maintain our 'Reduce' stance with a revised target price of Rs 6,430, as valuation continues to remain punchy (7.1x Mar24 ABVPS)," the brokerage house added. 

According to Motilal Oswal, 4QFY22 was a healthy quarter for BAF, with all-round momentum across key business parameters. Customer acquisitions and trajectory in new loans remain strong. This momentum will only get stronger with its digital ecosystem: app, web platform, and full-stack payment offerings. 

"We expect it to contain credit costs ~1.7% in FY23. Even though the management has guided that it will prioritize margin over loan growth, NIM compression is likely in FY23, as levers like normalization in excess liquidity and borrowing costs have largely played out. The competitive landscape also continues to remain aggressive," the brokerage house added. 

"We cut our FY23/FY24 PAT estimate by four per cent each to factor in potential NIM compression and a higher OPEX ratio of ~35% over the next two years. BAF should deliver a RoA/RoE of 4.2-4.4%/21-22% over the medium term. We maintain our Buy rating with a target price of Rs 8,350 per share (8x FY24E BVPS)," it said in its recent report. 

The Board of Directors of the company approved a dividend of Rs 20 per equity share of the face value of Rs two for FY22.