Buy Bajaj Finance; target of Rs 980: Sharekhan

Sharekhan's research report on Bajaj Finance

Q4 earnings were mainly aided by fee income/ treasury gains/other income offsetting weak NII/ higher opex (one off), supporting the return ratios. Asset quality improved, led by contained slippages and higher write-offs. Credit cost was higher on low base but remained within guided range. Loan / deposit growth was modest at 12% y-o-y/9% y-o-y, respectively. NIMs were stable q-o-q, although the outlook on NIMs is negative. Bank slightly lowered loan growth guidance to 12% for FY26E vs 14% earlier but is confident of maintaining RoA at ~1% going ahead.

Outlook

We maintain a Buy with an unchanged PT of Rs. 980 as there are no emerging concerns on asset quality and expect the bank to sustain RoA/RoE at ~1%/14-15% in the near to medium term. We acknowledge that core operating profitability would be under pressure in FY26E but that has already been priced in. Stock trades at 1.0x/0.9x its FY2026E/FY2027E core BV estimates.