Neutral Bajaj Finance; target of Rs 1000: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance’s (BAF) PAT grew 22% YoY to ~INR47.6b in 1QFY26 (in line). The company’s 1QFY26 NII grew 22% YoY to ~INR102.2b (in line). Non-interest income stood at ~INR23.8b (up 16% YoY), aided by higher income from investments in mutual funds. Opex grew ~19% YoY to ~INR41.2b (in line). PPoP stood at INR84.9b (in line) and grew 22% YoY. 1QFY26 RoA/RoE stood at 4.5%/19%.BAF’s 1QFY26 NIM contracted ~10bp QoQ to ~9.53%. Management highlighted that the CoF declined ~20bp QoQ to ~7.8%. Looking ahead, it expects a further reduction of 15-20bp, with CoF likely to settle at around ~7.6-7.65% by the end of FY26, without factoring in any additional rate cuts. This moderation in funding cost could support a slight positive bias to margins, with management guiding for ~10bp expansion in NIMs. We estimate NIM of ~9.7%/9.8% in FY26/FY27.

Outlook

We see limited upside catalysts due to rich valuations and a lack of near-term re-rating triggers. Consequently, we reiterate our Neutral rating on the stock with a TP of INR1,000 (premised on 4.5x Mar’27E BVPS).