Buy Bajaj Finance; target of Rs 8500: Motilal Oswal

Motilal Oswal is bullish on Bajaj Finance recommended buy rating on the stock with a target price of Rs 8500 in its research report dated January 30, 2024.

Broker Research

February 01, 2024 / 11:18 IST

Buy

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance (BAF)’s 3QFY24 reported PAT grew 22% YoY to ~INR36.4b (in line), while 9MFY24 PAT grew ~27% YoY to INR106.3b. NII grew 29% YOY to ~INR76.5b (in line). Non-interest income grew 9% YoY, and Net Total Income (NTI) grew 25% YoY to ~INR93b (in line). 3QFY24 NIM (calc.) declined ~25bp QoQ to ~12.4% while the reported NIM contracted ~10bp QoQ. We model a NIM compression of ~20bp in FY25 due to the expected rise in the cost of borrowings and difficulty in passing on any further interest rate hikes to customers. We model an AUM/PAT CAGR of ~30%/27% over FY23-FY26 and expect BAF to deliver an RoA/RoE of ~4.6%/23% in FY26. Key monitorables for FY25: 1) the degree to which the NIM compression can be offset with operating leverage, resulting in a decline in cost ratios; and 2) the impact on B2C businesses, both from a growth and credit costs perspective.

Outlook

Reiterate BUY with a TP of INR8,500 (premised on 4.6x FY26E BVPS).

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