Bajaj Finance shares surged 3% to hit a higher of Rs 5,168 per share on Thursday morning, generating it after of the major Sensex gainers. The stock jumped as investors reacted to the sturdy on-quarter development in net profit that the firm reported on Wednesday. Consolidated total revenue of Bajaj Finance in the fiscal third quarter surged to Rs 1,146 crore. The sturdy efficiency hints at a recovery becoming staged by Bajaj Finance. With this, worldwide brokerage and study firm Bernstein has turned bullish on the stock upgrading the target cost and its rating of the stock.
“We upgrade Bajaj Finance (BAF) to Outperform. Bajaj Finance, after 3 quarters of risk consolidation, looks set to come back to its pre-pandemic growth trajectory in FY22,” the brokerage firm stated in a report. The bullish sentiment is helped by the digital capabilities of Bajaj Finance. “Its Fintech initiatives position it as an omni-channel ‘pay later’ player with an established cross-sell customer base of ~24 Mn users and 2.6k merchant relationships,” they added.
Technological advances to help development
The report stated that Bajaj Finance has leveraged technologies to decrease operating expenses as they scaled up the in-retailer customer-tough lending platform. The new tech architecture of Bajaj Finance, develop on cloud makes it possible for it flexibility, scalability and speed, according to Bernstein. This can aid the firm launch new solutions speedy and integrate application layers with sturdy analytics.
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Further, the management hopes that the digital transformation project will aid them reduced price of acquisition, raise consumer acquisition volumes and improve its cross-sell franchise. The Bajaj Pay platform will roll out this quarter, enabling clients and merchants to make payments and integrating EMI cards and % EMI applications. “We believe BAF has the ingredients for building a unique omnichannel Buy-now Pay-later (BNPL) marketplace – it has the merchant relations, the cross-sell customer base and a tested credit engine. The missing piece, for now, is the payments experience. Bajaj Pay will fill that whitespace,” the report added.
Heading toward normalisation
After obtaining suffered for the duration of the pandemic, Bajaj Finance has reported a sharp bounce back in consumer acquisition in the October-December quarter. On the asset high-quality front, pro-forma NPAs stood at 2.86%, up from 1.61% on-year basis. “With normalized sanctions next quarter onwards, we expect the loan growth outlook to normalize. Sequential recovery in consumer durable and unsecured lending is positive. Competitive interest rates, stamp duty benefits and macro-economic recovery will support real estate and mortgage markets,” analysts at Bernstein stated.
Target cost
Bernstein has upgraded Bajaj Finance, valuing it at 40x FY23E EPS for its tech proposition, core franchise strength and execution track record. The brokerage firm expects the stock to surge to the target cost of Rs 7,240 per share, up from the preceding target cost of Rs 3,300 per share. The revised target translated to a enormous 45% upside.
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