Bajaj Finance had reported a 53% jump in consolidated net profit at Rs1,481 crore for the quarter ended September 2021, thought it was below the market estimates. Total income rose by 19 per cent to Rs7,732 crore during the July-September period of 2021-22, as against Rs6,520 crore in the same quarter of FY21, the non-banking finance company said. Bajaj Finance shares were down 1.3% to Rs7741 in Mumbai trade today. Year to date, the stock is however up about 45%, outperforming the broader markets. 

Though Bajaj Finance Q2 earnings were below estimates, analysts say it stood healthy on several fronts and many brokerages have reiterated their buy on the stock.

Bajaj Finance said it registered a 75% jump in the number of new loans booked in the September quarter at 63.30 lakh as against 36.20 lakh in the year-ago period while the company's asset under management (AUM) as of September 30, 2021 stood at Rs1.67 lakh crore, up by 22 per cent from Rs1.38 lakh crore earlier.

Gross NPA (non-performing assets) and net NPAs on a sequential basis stood at 2.45% and 1.10%, respectively, at the end of September 2021, as against 2.96 per cent and 1.46 per cent as of June 2021.

Commenting on the earnings, Motilal Oswal in a note said: “While net interest income at Rs4290 crore (10 percent beat) was up 26% YoY due to higher interest income from surplus liquidity and from IPO financing, it was mitigated by higher operational expenditure (up 48% QoQ and 40 percent above our estimate). Credit costs stood at Rs1300 crore (estimates Rs1100 crore), which included additional COVID-19 provisions of Rs350 crore in 2QFY22 to guard against contingencies from a potential third wave." 

The brokerage has reiterated buy on Bajaj Finance, with a target price of Rs8,650 per share. “Barring any new COVID disruption, we expect Bajaj Finance to deliver 24% AUM growth in FY22E and a 25 percent CAGR thereafter. We expect margin to sustain driven by a reduction in the negative carry as excess liquidity normalizes and the decline in interest income reversals. We have increased our credit cost estimate for FY22E to 2.8% (v/s 2.6 percent earlier). We expect BAF to deliver a RoA/RoE of 4.4-4.7%/21-23% over FY23-24E. Given the expected recovery in asset quality in 2HFY22 and the sustained milestones-driven progress made by Bajaj Finance in its digital transformation program, we reiterate our Buy rating with a target price of RS 8,650 per share (9x Sep 23E book value per share)," Motilal Oswal said.

Another domestic brokerage Prabhudas Lilladher said though Bajaj Finance earnings "missed our estimates on account of elevated collections costs and employee hiring, yet stood healthy on several fronts. (1) Marked improvement in auto finance NPAs, lower write-offs, higher PCR at 55% vs 51% (Q1FY22) despite improvement in headline GNPA (4) strong core income with NII up 19% YoY.

The brokerage has a buy on Bajaj Finance shares with target price of around Rs9100.  “As operating leverage improves, we would witness cost-income decline leading to slight estimates tweaking for FY23-24. As Bajaj Finance stands geared to foray into new credit cycle backed by strong liquidity buffers, robust collections framework and digital transformation, we reiterate BUY recommendation on the stock. Premium valuations is here to stay as Bajaj Finance is now perceived as a profitable fintech lender, so our PBV stands at 9.4x Sep’23E, TP largely unchanged at Rs9092 (earlier Rs9,096)," the brokerage said.