Buy Bajaj Finance; target of Rs 8800: Emkay Global Financial

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26 Aug, 2025 12:21

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Bajaj Finance (BAF) logged a strong quarter, with PAT of ~Rs43 bn exceeding consensus and our estimates by ~6% and ~3%, respectively. Credit costs were stable sequentially at ~2.1%, with the management expecting improvement in Q4 due to better collection efficiency observed in Dec-24 and Jan-25, and maintained full-year FY25 guidance at 2-2.1%. Confident about its growth trajectory, the management expects ~25% business expansion while sustaining current margins and achieving PAT growth of ~20-22%, emphasizing that quality and margins will not be compromised for growth. BAF aims to leverage Airtel’s customer base for acquiring ~200mn unique customers, having already launched two products with plans to introduce nine more by Mar-25. On fee income and the discontinuation of its co-branded credit card, the management gave reassurance that income levels would be stable, with continued earnings from distribution fees and revenue sharing under the co-brand arrangement. Given its strong financials—with ~4% RoA, above-20% RoE, and sustained earnings growth above 20%—and incorporating the Q3 developments and management insights,

We revise our FY25-27 estimates, leading to a ~2.5% upward revision in earnings. We reiterate BUY on the stock, raising our Dec-25E target price by ~5% to Rs8,800 (vs Rs8,400 earlier), implying FY26E P/BV of 5.2x on a standalone basis.

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