Buy Bajaj Finance; target of Rs 8,500: ICICI Securities

ICICI Securities is bullish on Bajaj Finance has recommended buy rating on the stock with a target price of Rs 8,500 in its research report dated July 24, 2024.

Broker Research

July 25, 2024 / 20:46 IST

BUY

26 Aug, 2025 12:21

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ICICI Securitie's research report on Bajaj Finance

GNPA ratio was stable at 0.86% vs 0.85% QoQ and 0.87% YoY while NNPA ratio inched up to 0.38% vs 0.37% QoQ and 0.31% YoY. Gross loan loss for the company stood at INR 17.9bn or 2.12%. However, during the quarter, Bajaj utilised management overlay to the extent of INR 1.05bn and hence loan loss (net) after adjusting for management overlay stood at 1.99%. Even after utilisation, loan loss was elevated vs 1.66% QoQ and 1.57% YoY. Muted collection efficiencies was the primary reason for inch up in credit cost as per the management.

Outlook

Bajaj Finance’s (Bajaj) Q1FY25 result has been largely in line except credit cost, which was higher-than-guided range. Credit cost increased to 2.12% (adjusted for management overlay utilisation stood at 1.99%) vs guidance of 1.75-1.85%. While management highlighted that incremental delinquency and collection trend in Jul’24 is better than Apr-Jun’24 and credit cost in H2FY25 should be materially lower than H1, meeting FY25 credit cost guidance will be the key thing to watch out. Strong core operating performance as reflected in consolidated AUM growth of 7% QoQ and PPoP growth of 8% QoQ, was largely driven by strong 8% QoQ revenue growth. This resulted in Bajaj sustaining industry-leading profitability with RoA at 4.6% and RoE at 20% in Q1. Its resilient business model, built on strong customer acquisition engines and cross-sell, augurs well for maintaining leadership in the NBFC space. We retain BUY; TP unchanged at INR 8,500, valuing the standalone business at 5x FY26E BVPS and INR 830 towards housing subs.

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