Buy Bajaj Finance; target of Rs 9300: Sharekhan

Sharekhan's research report on Bajaj Finance

Bajaj Finance Limited (BAF) reported in line performance with 28% y-o-y growth in earnings. NII grew by 30% y-o-y and 7.1% q-o-q despite NIM pressure (down 12 bps q-o-q) supported by strong AUM growth. BAF delivered strong AUM growth of 33% y-o-y in Q2FY2024 vs full fiscal guidance of 29-31%. Sequentially, AUM grew at 7.5% q-o-q on strong traction in auto loans (12% q-o-q), SME (10.6% q-o-q) and mortgage (9.4% q-o-q). Overall, asset quality trends are stable. GS-3 ratio marginally rose by 4 bps sequentially at 0.91% (vs 0.87% q-o-q). NS-2 ratio stood at 0.31% with PCR improving to 66% (vs 64% q-o-q). GS-2 assets reduced to 1.1% v/s 1.2% q-o-q). Management expects 20-30 bps compression in NIM over the next half of fiscal but believe the impact to be in H2FY24 partly offset by operating leverage gain supporting the company to deliver RoA over 5.0% for FY24. We have rolled forward our valuation to September 2025 estimates.

Outlook

We reiterate Buy on the stock with a revised PT of Rs9,300. At the CMP, the stock trades at 6.1x/4.9x FY2025E/FY2026E BV estimates.