Bajaj Finance shares at Rs 7,400 or Rs 10,000? What analysts say after in-line Q2 results

Bajaj Finance Ltd reported an in-line September quarter, with analysts largely maintaining their positive stance on the stock saying the NBFC is well-capitalised and has enough liquidity to take advantage of the secular credit upcycle ahead. They noted that the net interest income (NII) for Bajaj finance grew at a slower pace in Q2 compared with asset under management (AUM) growth amid margin pressure but were quick to note that the NBFC delivered a healthy profitability as the operating leverage kicked in. For now, a couple of brokerages have price targets up to Rs 10,000 suggest up to 23 per cent upside potential for the stock.

Bajaj Finance clocked 28 per cent YoY surge in net profit at Rs 3,551 crore on 26 per cent jump in net interest income (NII) at Rs 8,398 crore. Net interest margin fell 11 basis points sequentially to 10.3 per cent due to a higher cost of funds at 7.67 per cent.

A significant cross-sell franchise, foray into new segments/business transformation initiatives and proven execution track record provide confidence about Bajaj Finance future prospects, Nirmal Bang Institutional Equities said in a note.

"We have made marginal changes in FY24 estimates and have raised FY25E PAT by 5 per cent, driven by strong growth in NIM and operating leverage. We have rolled forward our valuation to September 2025E ABV of Rs 1,781 and assigned a multiple of 5.3 times, based on which we have derived a target price (TP) of Rs 9,520, reflecting an upside of 18 per cent," the brokerage said.

InCred Equities noted that Bajaj Finance plans to raise Rs 8,800 crore of equity to support its next phase of growth aided by new lending areas as well as penetration improving in current geographies.

This brokerage has raised its earnings estimates by 9.2 per cent for FY25 and 8.1 per cent for FY26, increasing its target price to Rs 9,850 from Rs 9,000.

PhillipCapital said Bajaj Finance has seen multiple cycles and come out with lower than expected credit costs through each.

A diversified funding base, AAA rating, positive ALM in less than one-year bucket and a high churn book make it a compelling investment argument, the brokerage said while suggesting a target price of Rs 10,000 for the stock.

"The hallmark of any credit business is credit cost and risk management. The collection architecture of BAF is very granular and efficient. We remain confident of growth being 25 per cent-plus in FY24/FY25/FY26," PhillipCapital said.

Motilal Oswal Securities finds the stock worth Rs 9,600. It believes investors would watch out for the evolution of Bajaj Finance's payments landscape and adoption of its payment offerings. They would also track the degree to which the NIM compression can be offset with operating leverage, resulting in a contraction in cost ratios.

Meanwhile, Kotak Institutional Equities has maintained its 'Reduce' call on the stock. Macro tailwinds, benign credit environment and Bajaj’s aggressive franchise expansion will likely translate to a strong year for the company amid headwinds of rising funding costs, it said. The brokerage said it has factored in a proposed capital issuance as it upped its fair value on the stock to Rs 7,400 from Rs6,800 earlier.

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