Most analysts raised their price targets for Bajaj Finance Ltd. on hopes of a recovery in earnings in the next fiscal and lower credit costs.
That's despite a drop in income and stressed assets inching higher in the third quarter. The consumer finance-focused lender reported a 29% year-on-year fall in net profit to Rs 1,146 crore in the October-December period. Net interest income declined by 5%.
The company's pro-forma gross non-performing asset ratio would have been at 2.86% compared with 1.34% in the quarter ended September, had the Supreme Court's freeze in interest-on-interest case not been there. Because it didn't classify any account as NPA since Aug. 31, the gross NPA ratio came at 0.55% compared with 1.03% as on Sept. 30, 2020.
Loan loss provisions rose 63% over the year earlier, while it also provided one-time restructuring to loans worth Rs 2,040 crore under the Reserve Bank of India's circular on Aug. 6.
Still, analysts said Bajaj Finance has one of the strongest balance sheets in the sector, as they maintained their bullish investment recommendations. They, however, are cautious over possible stress in its flexi loan book.
Shares of Bajaj Finance gained as much as 3.75% to Rs 5,168. The stock is up for the third straight day. Of the 32 analysts tracking the company, 16 have a ‘buy' rating, while eight each suggest a ‘hold' and a ‘sell'. The stock now trades 10.1% higher than its 12-month Bloomberg consensus price target of Rs 4,601.
Here's what analysts have to say about Bajaj Finance's Q3 results...
