Bajaj Finance: Target Price of Rs 1100 Set by Prabhudas Lilladher

Bajaj Finance Reports Strong Growth in Assets Under Management

Bajaj Finance has witnessed a significant growth in its Assets Under Management (AUM), which has increased by 22% year-over-year (YoY) to INR 5,099.8 billion. This growth is attributed to the strong performance of its mortgage, sales finance, and B2C loans segments. The company has also seen sustained traction in its new verticals, including cars, gold, and microfinance institutions (MFIs), and has added approximately 15-17 million new customers in the fiscal year 2027.

According to the research report by Prabhudas Lilladher, the company's AUM is expected to grow by 23% in the fiscal year 2027 and 22% in the fiscal year 2028. However, the net interest margin (NIM) is expected to moderate in the fiscal year 2027 due to the hardening of bond yields, which is likely to impact the cost of funds (CoF). The asset quality ratios have seen an improvement across all segments, and the credit cost has improved in the fourth quarter (Q4) of the previous year, with a credit cost of 1.65%. This improvement is supported by a healthy trend in vintage credit performance.

The operating expenses (Opex) are expected to moderate by approximately 30 basis points in the fiscal year 2027, which is a result of the improved financial inclusion capabilities. The company's positive growth outlook, lower credit cost guidance, and improved Opex in the fiscal year 2027 have led the research firm to tweak its estimates.

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Recommendation

Based on the positive growth outlook and improved financial performance, Prabhudas Lilladher has upgraded its recommendation to BUY with a multiple of 4.1x (vs. 3.9x earlier) and a target price of Rs 1,100.