Emkay Global Maintains Sell Rating on Bajaj Finance, Targets Rs 950
Bajaj Finance Reports Strong Quarter, Beats Estimates
Emkay Global Financial has released a research report on Bajaj Finance (BAF), highlighting a good quarter in terms of growth, profitability, and credit cost. The company reported a Profit After Tax (PAT) of Rs54.6 billion, which is above Emkay Global Financial's estimates and broadly in line with street estimates.
The strong quarterly performance can be attributed to a lower credit cost of 1.6%, which the management expects to further improve in the coming months. The company has observed better trends across the 3MOB, 6MOB, and 9MOB cohorts, leading to a more optimistic outlook. With improving operating momentum, backed by better credit performance, calibrated portfolio actions, and operating efficiency gains, Bajaj Finance is entering Fiscal Year 2027 with a positive note.
The company has guided for Asset Under Management (AUM) growth of approximately 22-24%, with PAT growing slightly ahead of AUM. This is expected to be driven by stable margins, improving operating expense (opex) efficiency, and a more benign credit cost environment. Specifically, Bajaj Finance aims to achieve a 25-40bps improvement in opex/net total income (NTI). The company has also revised its credit cost guidance to 1.45-1.60% from 1.65-1.75% due to a change in presentation.
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| Guidance | Original | Revised |
|---|---|---|
| Credit Cost | 1.65-1.75% | 1.45-1.60% |
Factoring in the Q4 performance and management commentary, Emkay Global Financial has adjusted its Fiscal Year 2027-2028 estimates, resulting in a 4-8% increase in Earnings Per Share (EPS).
Recommendation
Despite the positive outlook, Emkay Global Financial reiterates a REDUCE recommendation for Bajaj Finance, while increasing its March 2027 Estimated Target Price (TP) by approximately 6% to Rs950 from Rs900, implying a Stock Asset (SA) Fiscal Year 2028 Estimated Price-to-Book (P/B) ratio of 4.2x.
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Investor Takeaway
Maintain a sell rating on Bajaj Finance with a target price of Rs 950.
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