Bajaj Finance, Aavas Financiers, MMFS, SBI Card, NAM India: InCred shares target prices

InCred Equities in a fresh note on financial services sector said 'revival is one or two quarters away’ is the common refrain for affordable housing, SME loan & credit card businesses. The better-than-expected performance of vehicle finance companies is seen as an anomaly, it said. 

While Bloomberg consensus indicated a flat-to-6 per cent drop in earnings per share (EPS) estimates post December quarter results,  InCred Equities believes affordable housing finance companies (HFCs) are attractively placed with concerns overdone. The brokerage is positive on vehicle financiers, citing ease in asset quality pain.   

InCred Equities added Home First Finance Company India Ltd and Aavas Financiers to its high-conviction list and suggested targets of Rs 1,450 and Rs 1,850, respectively. It retained Bajaj Finance in its list with an 'Add' rating and a target price of Rs 1,200. It is positive on vehicle financiers Shriram Finance, Mahindra & Mahindra Financial Services Ltd and Cholamandalam Investment & Finance Company. The domestic brokerage upgraded Cholamandalam Investment to 'Add' and SBI Card to Hold. It retained Hold on Spandana Sphoorty Financial. 

"Among AMCs, we are positive on Nippon Life India Asset Management Ltd (NAM India), Aditya Birla Sun Life, & UTI (all ADD) and remain cautious on HDFC AMC (HOLD)," it said.

InCred Equities said most financial players saw net interest margin (NIM) expansion of 8-60 basis points sequentially, largely led by lower cost of funds. Credit costs are stable-to-positive with easing asset quality cycle, it said.

It said management commentaries on the affordable housing space indicated a revival in the near term led by higher loan ticket sizes. Most lenders indicated heightened competitive pressure and PLR cuts to the extent of 10-15bp in 4QFY26, it said,

"Disbursement growth remained relatively slow for our coverage universe (2-10 per cent QoQ) due to a volatile trend in recent quarters. NIM had a divergent movement, with Home First Finance Company
(HFFC) witnessing a 64 basis points sequential improvement in NIM due to favourable leverage mix and
Aavas Financiers (Aavas) witnessing a 17 bps QoQ dip. Credit costs were well-contained," it noted.

In the case of Bajaj Finance, its assets under management (AUM) grew 22 per cent YoY driven by broad-based traction barring rural B2C and SME lending segments. "Credit costs spiked (to 3 per cent) on account of an updated Expected Credit Loss (ECL) model, although they included one-time excess provision (1.91% excl. one-time provision). Management reiterated its 20 per cent YoY growth guidance across business segments, with 1.65-1.75 per cent credit cost guidance," InCred Equities said.

SBI Cards reported a gross addition of less than 1m cards in 3QFY26, for the third consecutive quarter, but is slated to pick up pace in another one-to-two quarter, InCred said. On Spandana Sphoorty Financial (SSFL), InCred said the NBFC reported a slight pick-up in disbursements led by
higher ticket sizes. Branch consolidation is underway and the next phase of growth lies on
higher branch productivity. Incrementally, strong improvement in NIM and asset quality, it said.

For AMC players, InCred said asset under management grew 4-6 per cent QoQ, driven by strong inflows & mark-to-market (MTM) gains. Revenue yields were flat, while PAT rose by 7-17 per cent QoQ led by MTM gains & lower opex.