Bajaj Finance Q3 Results Review -Elevated Credit Costs From B2C Businesses; NIM Contracts: Motilal Oswal

Motilal Oswal Report

Bajaj Finance Ltd.’s Q3 FY24 reported profit after tax grew 22% YoY to ~Rs 36.4 billion (inline), while 9M FY24 profit after tax grew ~27% YoY to Rs 106.3 billion.

Net interest income grew 29% YOY to ~Rs 76.5 billion (inline). Non-interest income grew 9% YoY, and net total income grew 25% YoY to ~Rs 93 billion (in line).

Q3 FY24 net interest margin (calculated) declined ~25 basis points QoQ to ~12.4% while the reported NIM contracted ~10 bp QoQ. We model a NIM compression of ~20 bp in FY25 due to the expected rise in the cost of borrowings and difficulty in passing on any further interest rate hikes to customers.

We model an assets under management/profit after tax compound annual growth rate of ~30%/27% over FY23-FY26 and expect Bajaj Finance to deliver an return on asset/return on equity of ~4.6%/23% in FY26.

Key monitorables for FY25:

1. the degree to which the NIM compression can be offset with operating leverage, resulting in a decline in cost ratios; and

2. the impact on B2C businesses, both from a growth and credit costs perspective.

Reiterate 'Buy' with a target price of Rs 8,500 (premised on 4.6 times FY26E book value per share).

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.