Jefferies and CLSA retained Bajaj Finance Ltd. shares as their top picks despite disappointing asset under management and growth guidance and rising credit cost. Bajaj Finance retained its preference from top brokerages because the stock is expected to yield decent returns to shareholders.
CLSA has an Outperform rating. It raised the target price to Rs 1,200 from Rs 1,150 apiece. The current target price implies 11% upside potential from current levels.
Jefferies retained 'Buy' rating while it raised the target price to Rs 1,270 apiece from Rs 1,100 apiece. The current target price implied 17% upside from Monday's close price.
Second-quarter's earnings had a limited impact on Jefferies' estimate for the company. It has projected 23% CAGR in net profit over financial years 2025 and 2028.
Bajaj Finance has outperformed as a Nifty-50 stock. CLSA believed that it was long overdue as the stock was languishing throughout 2024. At 26 times financial year 2027, PE is now at 10–12% discount to its pre-COVID multiple. The brokerage sees shareholders benefitting from strong earnings-per share compounding.
There are very few large-cap stock that offers such compounding, CLSA stated.
On similar lines, Jefferies said that Bajaj Finance continues to be amongst best platforms for consumption spending and commercial finance. Hence, the stock remains, Jefferies' top picks.
Bajaj Finance Q2 Earnings Key Highlights (Consolidated, YoY)
Net Profit at Rs 4,875 crore versus NDTV Profit Estimate of Rs 4,969 crore
NII at Rs 10,785 crore versus NDTV Profit Estimate of Rs 10,955 crore
Net Profit rose 21.9% at Rs 4,875 crore versus Rs 4,000 crore
NII rose 22% to Rs 10,785 crore versus Rs 8,838 crore
CLSA has cut the net profit estimate for the period calendar year 2026 and 2028 by 2% because of the low loan growth guidance.
Credit cost in July–September rose 3 basis points sequentially to 2% because of the higher net-slippage. Bajaj Finance's net slippage rose 80 basis points on the quarter to 2.9%. The non-banking financial company's net stage 2+3 formation improved to 1.96%.
Bajaj Finance has reduced the growth guidance 100 basis points to 22–23%, due to weaker trends in SME and housing segments, Jefferies said in a note.
Bajaj Finance's management guided 1.85–1.95% credit cost for the entire financial year 2026, , CLSA said. Credit cost would likely be 15% lower at 1.85% after excluding two-wheeler book. The brokerage believes that this would alone aid credit cost improvement.
CLSA trimmed the estimate for loan growth 2% to 22–23%
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