Q2FY24 Preview: Bajaj Finance: NII seen at Rs. 17 billion, PAT at Rs. 4 billion

16 Oct 2023 , 10:44 AM

Result date: October 17, 2023

Recommendation: Buy

Target price: Rs. 9,200

Bajaj Finance has reported highest ever sequential growth in assets under management (AUM) of 7.5% (up 33% over the year-ago quarter) in a seasonally weak quarter along with strong new customer acquisition (3.6 million – second highest in its history). 

Margin compression (10 basis points sequentially) due to higher cost of funds is expected to result in slightly slower NII growth of 30% YoY (up 7% sequentially). Analysts at IIFL Capital Services expect credit costs to inch up to 165 basis points (up 12 basis points sequentially) partially offset by lower opex (C/I: -15 basis points sequentially) as benefits of operating leverage play out. 

Adjusted for tax rate normalization, Bajaj Finance should deliver earnings growth of 27% over the year-ago quarter and 5% sequentially. The company could report ROA (% of AUM) of 5.1%.

The company could post 22% sequential growth in Profit After Tax (PAT) while this metric could decline by 15% over the year-ago quarter.

Important management insights to watch out for:

• Demand trends across key segments
• Outlook on margins, asset quality

Rs. Billion	September 2023 estimates	YoY change	QoQ change
NII (Ex-assignment income)	17.1	13%	5%
Net operating income	17.5	14%	5%
PPOP	10.4	21%	5%
Profit After Tax	4.3	(15)%	22%

Source: IIFL Research