Bajaj Finance Ltd.'s better-than-expected June quarter earnings prompted a wave of optimism from brokerages, with Citi, Jefferies and Morgan Stanley raising their target prices after the lender delivered strong loan growth, resilient margins and improving asset quality.
The non-bank lender reported a 27.4% year-on-year rise in consolidated Q1 net profit to Rs 5,986 crore, ahead of analysts' expectations of Rs 5,846 crore. Net interest income (NII) increased 23% to Rs 12,571 crore, also surpassing estimates, while operating profit came in at Rs 10,137 crore, marginally above Street forecasts.
Asset quality continued to improve, with gross non-performing assets (GNPA) declining to 0.96% from 1.03% a year ago, while net NPA stood at 0.39%, better than expectations.
Morgan Stanley retained its 'Overweight' rating and raised its target price to Rs 1,225 from Rs 1,175, calling the company to be in a "strong phase." Jefferies maintained its 'Buy' rating while increasing its target price to Rs 1,280. It continues to rank the lender among its top picks in the large-cap financial space.
Citi was even more optimistic, raising its target price to Rs 1,300 while retaining a 'Buy' rating. The brokerage described the performance as "stronger, cleaner, faster," saying management's commentary pointed to improving business trends and that FY27 guidance could be revised higher after the second quarter.
Macquarie remained the lone bear, reiterating its 'Underperform' rating with a target price of Rs 850.
Brokerages on Bajaj Finance
Morgan Stanley
- Maintain Overweight; Hike target price to Rs 1,225 from Rs 1,175.
- Q1 results beat expectations across almost every metric.
- Expects management to revisit FY27 guidance during the Q2 results call.
- Target price revision is driven by stronger loan growth, resilient NIMs and improving credit costs.
- Sees upside risks to current estimates.
Macquarie
- Maintain Underperform; Target Price: Rs 850.
- Strong execution was seen across the business.
- Margin resilience continues to offset cost pressures.
- Prudent provisioning remains a key positive, though valuations are demanding.
- Rising borrowing costs and a potential rate hike could disrupt margins.
Jefferies
- Maintain Buy; Hike target price to Rs 1,280 from Rs 1,210.
- Broad-based loan growth and resilient margins supported performance.
- The benefits of FIN-AI initiatives are becoming evident.
- Asset quality continues to improve, with potential downside to credit cost guidance.
- Expects Bajaj Finance to continue leading large-cap financials in growth and profitability.
- Remains among Jefferies' top picks.
Citi
- Maintain Buy; Hike target price to Rs 1,300 from Rs 1,120.
- Believes the company is delivering stronger, cleaner and faster growth than guided.
- Expects FY27 guidance to be revised after the Q2 results.
- Credit costs continue to improve structurally.
- Management commentary on underlying business trends remained unequivocally constructive.
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