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Shares of Bajaj Finance surged over 6 per cent on Thursday after the diversified non-banking finance company reported an 18 per cent increase in consolidated net profit to Rs 4,308 crore for the December quarter.
The stock rallied 6.33 per cent intraday to touch Rs 8,249.95 – a 52-week high -- on the BSE.
It reclaimed the Rs 8,000 mark for the first time since October 17, 2023.
The company reported a net profit of Rs 3,639 crore in the year-ago period.
The net interest income rose to Rs 9,382 crore for the third quarter of the ongoing financial year, up 23 per cent year-on-year, Bajaj Finance said in a regulatory filing on Wednesday.
Most analysts have raised their target price on the stock, lauding its better-than-expected Q3FY25 results.
A Bloomberg poll of analysts had projected a net profit of Rs 4,136 crore.
The total assets under management (AUM) was Rs 3.98 trillion at the end of December 2024, clocking a growth of 28 per cent year-on-year (Y-o-Y).
In absolute terms, the AUM grew by Rs 24,119 crore in Q3FY25.
New loans booked during the quarter were highest-ever, at 12.06 million, as against 9.86 million in Q3FY24 —a growth of 22 per cent.
It added a record 5.03 million customers to its franchise during the quarter, taking the total customer franchise to 97.12 million as of December 31, 2024.
Going ahead, the management has reiterated its guidance of around 25 per cent AUM growth for FY26, supported by rising contributions from newer businesses and a recovery in rural business-to-customer (B2C) growth.
The strong Q3 performance boosted sentiment among brokerages.
"To reflect the Q3 developments and the management commentary, we tweak our FY25-27 estimates, which leads to a Rs 1-3 per cent increase in earnings per share (EPS).
"Given the 4.5 per cent annualised return on asset (RoA) and above-20 per cent return on equity (RoE) with over 20 per cent earnings growth remaining intact, we reiterate 'buy' on the stock," said Emkay Global Financial Services.
The brokerage has raised its December 2025 target to Rs 8,800.
During the earnings call, the management said it has entered into a strategic partnership with Bharti Airtel, eyeing an additional customer base of 200 million users for its financial products, which would be a fresh market segment distinct from its existing 97 million customers.
Initially, the NBFC will roll out two financial products as pilot projects on the Airtel Thanks App.
By March 2025, this would be increased to nine products.
Analysts at Citi Research, who have raised their target price to Rs 9,060 while maintaining a 'Buy' rating, believe the tie-up with Airtel, in conjunction with Bajaj Finance 3.0 FIN-AI strategy, provides growth visibility.
Those at Morgan Stanley have reportedly maintained 'overweight' rating with a higher target price of Rs 9,300, and Nomura has maintained 'buy' with a higher target of Rs 9,000.
Meanwhile, Bajaj Finance's loan losses and provisions stood at Rs 2,043 crore at the end of Q3FY25 with Net Stage 2 assets increasing by Rs 101 crore and Net Stage 3 assets by Rs 507 crore.
The gross non-performing asset (GNPA) ratio and the net non-performing assets (NNPA) ratio were 1.12 per cent and 0.48 per cent, respectively, as of December 31, 2024, as against 0.95 per cent and 0.37 per cent on December 31, 2023.
The credit costs for the quarter remained elevated, but stable sequentially, at 2.1 per cent.
The management expects some moderation in Q4FY25 due to improved collection efficiency.
Analysts at Motilal Oswal Financial Services caution investors that despite a robust performance during the quarter driven by healthy AUM growth and well-contained credit costs, Bajaj Finance's foray into multiple new areas, such as cars, tractors, CVs, and MFI, could (in the future) make its growth and credit costs vulnerable to cyclicality.
"Valuations at 3.4x price-to-book value (P/BV) and 18x FY27E price-to-earnings (P/E) are not inexpensive, and the focus now will shift to the management transition and the role that Rajeev Jain will play in the company from April 2025.
"We do not see any significant upside catalysts in the near-term given that the management transition will be very keenly watched until more clarity emerges," it said, with a 'neutral' rating but a higher target of Rs 8,300.
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