Buy Bajaj Finance; target of Rs 9521: Geojit Financial Services

Geojit Financial Services research report on Bajaj Finance

Bajaj Finance Ltd (BFL) is a leading non-banking financial company (NBFC) in India. It lends to retail, small and medium enterprises and commercial customers and accepts public and corporate deposits. In Q3FY25, total income increased 27.5% YoY to Rs. 18,058cr, driven by growth in interest income (+25.9% YoY), fees and commission income (+17.0% YoY), and other operating income (+55.0% YoY). Calculated net interest income (NII) grew 25.3% YoY and operating expenses (opex) rose 22.5% YoY. As a result, operating expense to net total income ratio improved from 33.9% to 33.1%, also aided by implementation of artificial intelligence capabilities to boost productivity. Reported profit after tax surged 18.4% YoY to Rs. 4,308cr, fuelled by operational efficiencies. In Q3FY25, Gross Non-Performing Assets (GNPA) and Net NonPerforming Assets (NNPA) was reported at 1.12% and 0.48% vs 0.95% and 0.37% in Q3FY24. Increased GNPA and NNPA ratios in two and three-wheeler finance segments was the major contributor to the overall increase in ratios. Assets under management (AUM), increased to Rs. 3,98,043cr in Q3FY25 vs 3,10,968cr in Q3FY24, with mortgages contributing major part of AUM. Three per cent of AUM growth was contributed by the new line of business.

Outlook

Moreover, the strategic partnership with Airtel is expected to increase the customer base for the company thereby driving revenue. Therefore, we reiterate our BUY rating on the stock, based on 4.4x FY27E BVPS with a rolled forward target price of Rs. 9,521.