Buy Bajaj Housing Finance; target of Rs 125: ICICI Securities

ICICI Securities's research report on Bajaj Housing Finance

Bajaj Housing Finance (BHFL)’s success story is shaped by its ability to outpace industry growth (better leverage) – highlighted by BHFL’s >25% credit growth since its foray into the mortgage business in FY17, complemented by pristine asset quality. BHFL’s strategic entry into project financing (space vacated by many between FY17–22) has served as the linchpin behind its growth. It has since developed a well-oiled customer acquisition engine for retail prime housing, focused on building non-housing loan businesses like LAP and LRD, while successfully leveraging direct/indirect sourcing channels beyond Bajaj Finance’s customer franchise. The exit of a large HFC created a vacuum and BHFL’s vantage helped it gain credit market share. We see BHFL likely sustaining >20% near-term AUM/PAT growth and an improving RoE trajectory.

Outlook

We model ~22% AUM CAGR and steady 12-13% RoE over FY26E/FY27E. We initiate coverage with a BUY rating and TP of INR 125, valuing the stock at 4x FY27E P/B.