Accumulate Bajaj Finance; target of Rs 1650: KR Choksey

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26 Aug, 2025 12:21

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KR Choksey's research report on Bajaj Finance

AUM grew to Rs.6,88,830 mn during the quarter, up 38.7% yoy and 14.4% qoq. On back of such high growth, NII has grown 48.4% yoy and 23.3% qoq to Rs. 20,725 mn with NIMs improving to 10.6% against 9.8% for Q4FY17 and 10.3% for Q1FY17. Part of the improvement has also been on account of improved borrowings mix. While cost income ratio has held stable on qoq basis at 42.0%, it has deteriorated by ~140 bps on yoy basis which impacted PPOP and thus PAT. PAT has grown at to Rs. 6,020 mn, up 42% yoy and 34.0% qoq. Annualized RoE on opening book value (FY17) stands at 25%, which has been achieved on back of various factors – stable yields, reduction in cost of funds, improved asset quality and strong disbursements growth. On the asset quality front, the company has moved to 90-dpd recognition norm as against 120-dpd followed until FY17. On comparable basis, asset quality has improved, as GNPAs have come down to 1.44% against 1.47% for Q1FY17.  PCR has dropped to 69% against 74% for Q4FY17 and 73% for Q1FY17, which has pushed up the net NPAs for the quarter to 0.53% (on 90-dpd basis).

Outlook

At current price Rs.1560, Bajaj Finance is trading at 4.4x FY20E BVPS. Given the robust outlook for the company, wherein the company is expected to outperform its own targets, the investments being undertaken as part of BFL 2.0, focusing on core expertise of consumer financing and consistent track-record of industry leading profitability (RoEs of 20%+), we assign a target multiple of 4.7x to FY20E BVPS, thus valuing the stock at Rs.1,650 per share, with a potential upside of 8%; therefore, we recommend to ACCUMULATE the stock.

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