Bajaj Finance's Target Hiked By UBS But Brokerage Cautious On High Credit Cost

UBS maintained its 'sell' rating on Bajaj Finance while hiking the target price to Rs 6,800 from 6,500. The brokerage remains cautious as it expects the credit cost to remain high. UBS also notes that there is too much optimism that has been priced into the earnings per share consensus.

The brokerage notes a structural decline in return on assets. The firm has raised its share in personal loans from 6.2% in March 2024 to 7.2% now.

The data around borrowers not paying a loan or credit card bill by the due date for NBFCs has worsened, with rising stress around the recent disbursements as well. Similarly in business loans, the underwriting trend has weakened in recent quarters.

The brokerage expects RoA to fall as the assets under management mix changes.

The brokerage expects Bajaj Finance's Liberalised Remittance Scheme to double customers by financial year 2029.

The company is also set to maintain aggressive cross-selling. But, the brokerage believes that expansion into dealer-driven products limits cross-sell ability, it said.

The budget boost is limited to the salaried 30% portion of personal loan asset under management, according to the brokerage.

Bajaj Finance share price fell as much as 1.11% during the day to Rs 8,345.6 apiece on the NSE. It was trading 0.57% lower at Rs 8,391.5 apiece, compared to a 0.19% decline in the benchmark Nifty 50 as of 10:24 a.m.

It has risen 23.17% in the last 12 months. The relative strength index was at 58.55.

Twenty eight out of the 38 analysts tracking the company have a 'buy' rating on the stock, five recommend a 'hold' and five suggest a 'sell', according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 8,662.6, implying an upside of 3.4%.