Bajaj Finance: HOLD Rating Stands! Brokerage REVISES Growth Target & Reveals Rs 1,030 Price!

Prabhudas Lilladher has released a research report on Bajaj Finance, noting a steady year-on-year AUM growth of 24%, reaching Rs 4,622.5 billion. While the festive season saw a strong 29% spending increase, Bajaj Finance has revised its overall growth guidance for Fiscal Year 2026 (FY26) downwards to 22-23%. This revision is primarily due to a strategic cutback in their Micro, Small, and Medium Enterprises (MSME) portfolio.

The company is observing robust traction in newer segments like Cars, Gold loans, and Microfinance Institutions (MFI), alongside a healthy addition of new customers. Consequently, the brokerage firm has adjusted its growth outlook for FY26 and FY27 to 23% and 24%, respectively.

Net Interest Margins (NIM) are projected to remain stable in FY26, supported by a decrease in borrowing costs. However, credit costs have remained elevated at approximately 2% for the quarter, attributed to continued stress in the captive auto and MSME loan portfolios. Although early-stage delinquencies show a healthy trend, the brokerage remains cautious, building in a higher credit cost of 2% for FY26E.

Earnings estimates for FY26/FY27 have been cut by 4% and 5%, respectively. The report assigns a price-to-ABV multiple of 4.2x on the September 2027 Adjusted Book Value, setting a target price (TP) of Rs 1,030. The recommendation is maintained at 'HOLD'.

Impact: This report's findings, particularly the lowered growth guidance and sustained high credit costs, may lead to a cautious short-term reaction in Bajaj Finance's stock. The 'HOLD' recommendation suggests a balanced view, with potential upside offset by ongoing risks. Impact Rating: 6/10

Difficult Terms: • AUM (Assets Under Management): The total market value of assets managed by a financial institution for its clients. • FY26/FY27E (Fiscal Year 2026/2027 Estimates): Projections for financial performance for the fiscal years ending in 2026 and 2027. • MSME: Micro, Small, and Medium Enterprises, referring to businesses of a certain size based on employee count or revenue. • NIM (Net Interest Margin): The difference between interest income generated from assets and interest paid out on liabilities, relative to interest-earning assets. • Credit Cost: The expense incurred by a lender due to borrower loan defaults, usually expressed as a percentage of total loans. • Delinquencies: The failure to make required payments on a debt or loan. • ABV (Adjusted Book Value): A measure of a company's net worth, adjusted for intangible assets, used for valuation. • TP (Target Price): A projected future trading price for a stock, typically set by analysts.