Neutral Bajaj Finance; target of Rs 10,000: Motilal Oswal

Motilal Oswal's research report on Bajaj Finance

Bajaj Finance (BAF)’s PAT grew 19% YoY to ~INR45.5b in 4QFY25 (in line). Adjusted PAT, after excluding the one-offs in credit costs and tax provisions, grew ~17% YoY. BAF’s FY25 PAT increased 16% YoY to INR167.6b. The company’s 4QFY25 NII grew 23% YoY to ~INR98.1b (in line). Non-interest income stood at ~INR21.1b (up 24% YoY), driven by an improvement in fee income and income from the sale of services. BAF’s 4QFY25 NIM contracted ~10bp QoQ to ~9.65%. Management guided that margins will remain stable in FY26, supported by an expected 10-15bp decline in the cost of borrowings (CoB). However, a steeper decline in CoB could lead to a minor NIM expansion as well. We estimate NIMs to remain largely stable at ~9.9% in each of FY26/FY27.

Outlook

The stock trades at 4.1x FY27E. Despite a healthy PAT CAGR of ~25% over FY25-FY27E and an RoA/RoE of 4.1%/21% in FY27E, we see limited upside catalysts given the rich valuations and lack of near-term re-rating triggers. Consequently, we reiterate our Neutral rating on the stock with a TP of INR 10,000 (premised on 4.5x Mar’27E BVPS).

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