Bajaj Finance Falls To Nearly Two-Month Low After Profit Estimate Downgrades
The Bajaj Finance stock declined 2.77% during the day to Rs 6,541.05 apiece on the NSE.
Shares of Bajaj Finance Ltd. dropped nearly 3% to the lowest in nearly two months on Wednesday as most analysts cut net profit estimates on concern over higher credit costs.
The non-banking financial company's consolidated net profit rose 14% to Rs 3,912 crore in the first quarter of the current financial year, meeting analysts' estimates.
Morgan Stanley cut the net-profit estimates by 1.8%, 1% and 0.7% for the current and the next two fiscals respectively. The brokerage maintains an 'outperform' rating on the stock with a target price to Rs 9,000, implying a potential upside of 34% from the previous close, according to a note.
Bernstein Research cut the target price to Rs 5,700 from Rs 6,800 apiece and also downgraded the stock to 'underperform', saying that the system-wide growth in retail credit would remain slow.
Bajaj Finance is also going to witness challenges in its new segments. The premium valuation is likely to see significant contraction.Bernstein
The non-bank lender saw higher credit cost during the April–June period primarily due to muted collection efficiencies and an expected credit-cost provisioning for continuing slippage to stage 2 assets, according to Motilal Oswal.
The brokerage cut Bajaj Finance's net-profit estimate for the next fiscal by 3% after pricing in a normalisation of higher and steady credit growth. The management has guided for 1.75–1.85% in the current fiscal, but Motilal Oswal is factoring in a net-credit cost of 180 basis points.
Nirmal Bang also downgraded the stock to 'accumulate' and cut the target-price multiple to 4 times as compared to 4.5 times. It cut the net-profit growth estimates by 2.9% and 6.6% for the current and the next fiscals respectively.
There are concerns that Bajaj Finance's net interest margin may come under pressure, as well as unfavourable product mix and higher cost of funds. The company is expecting a compression in the net interest margin for the first half of the fiscal, the brokerage said.
.png)
On the NSE, Bajaj Finance's stock declined 2.77% during the day to Rs 6,541.05 apiece, the lowest since June 5. It was trading 2.52% lower at Rs 6,557.55 per share, compared to a 0.17% decline in the benchmark Nifty at 11:15 a.m.
The share price has declined 10.21% in the last 12 months and 10.65% on a year-to-date basis. The total traded volume so far in the day stood at 1.31 times its 30-day average. The relative strength index was at 30.28.
Twenty-six out of the 35 analysts tracking the company have a 'buy' rating on the stock, four recommend 'hold' and five suggest 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 21.1%.
