Neutral on Bajaj Finance, target price Rs 8,300: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a neutral call on Bajaj Finance with a target price of Rs 8,300. The current market price of Bajaj Finance is Rs 7894.55. Bajaj Finance, incorporated in 1987, is a Large Cap company with a market cap of Rs 488741.04 crore, operating in the NBFC sector.

Bajaj Finance' key products/revenue segments include Interest, Fees & Commission Income, Other Operating Revenue, Income From Sale Of Share & Securities and Service Charges for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 18058.32 crore, up 5.63% from last quarter Total Income of Rs 17095.41 crore and up 27.48% from last year same quarter Total Income of Rs 14165.98 crore. The company has reported net profit after tax of Rs 4305.17 crore in latest quarter.

The company?s top management includes Mr.Sanjiv Bajaj, Mr.Rajeev Jain, Mr.Anup Saha, Dr.Naushad Forbes, Mr.Anami Roy, Mr.Pramit Jhaveri, Dr.Arindam Bhattacharya, Ms.Radhika Haribhakti, Mr.Rajiv Bajaj. Company has Deloitte Haskins & Sells as its auditors. As on 31-12-2024, the company has a total of 62 crore shares outstanding.

Investment Rationale
For FY26, the Bajaj Finance management guided an AUM growth of ~25%, credit costs of <2%, and PAT growth of ~22-23%, contingent on a stable external environment. Motilal Oswal Financial Services broadly maintains its FY26/FY27 PAT estimates as credit costs have now peaked and will remain below the guided outer range. We estimate a CAGR of ~27%/23% in AUM/PAT over FY24-FY27 and expect BAF to deliver an RoA/RoE of ~4.1%/21% in FY27. Valuations at 3.4x P/BV and 18x FY27E 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 Apr?25 onwards.

The brokerage expects asset quality to stabilize from 4QFY25 onwards, allowing BAF to navigate this mini-credit cycle effectively. However, they 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. They reiterate a Neutral call with a target price of Rs 8,300 (premised on 4x Sep?26E P/BV)

Promoter/FII Holdings
Promoters held 54.7 per cent stake in the company as of 31-Dec-2024, while FIIs owned 17.76 per cent, DIIs 15.04 per cent.