Neutral Bajaj Finance; target of Rs 7320: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance (BAF)’s reported PAT in 2QFY25 grew 13% YoY to ~INR40.1b (in line). NII grew 23% YoY to ~INR88.4b (in line). Non-interest income stood at ~INR21.1b (+3% QoQ). Fee income was lower QoQ due to the transfer of the collections activity to RBL Bank (in its co-branded credit cards). 1HFY25 PAT grew 13% YoY to ~INR79.3b and we estimate 2HFY25 PAT to grew 15% YoY. BAF’s 2QFY25 NIM contracted ~5bp QoQ to ~9.7%. The company expects that the ~25bp reduction in repo rates will lead to a ~10-12bp expansion in the NIM. However, the company plans to leverage the NIM expansion to support the growth of some of its newer lines of business launched over the past two years. We estimate NIM at 9.8%/9.9% in FY25/FY26.

Outlook

Despite a healthy PAT CAGR of ~24% over FY24-FY27E and RoA/RoE of 4.1%/21% in FY27E, we see limited upside catalysts. Consequently, we maintain our Neutral rating on the stock with a TP of INR7,320 (premised on 3.5x Sep’26E BVPS).