Sharekhan has given Buy recommendation for Bajaj Finance with a target price of Rs. 8500 in its research report issued on Sep 07, 2022

Sharekhan’s research report on Bajaj Finance

Bajaj Finance (BAF) has entered FY2023 on a strong note as seen in its Q1FY23 numbers. A large franchise of 60.3 million customers, healthy momentum in customer acquisition and strong cross-selling ability (34.7 mn) would support business growth. BAF expects to double its AUM by FY2025. Despite higher opex led by accelerated investments in technology, geographical expansion and talent acquisition, its higher pricing power and normalisation of credit costs are likely to support strong earnings momentum going ahead. Asset quality is among best in industry with GNPA of 1.25%, NNPA of 0.6% and gross stage-2 assets at 1.8% (>60 days overdue). Pandemic-led stress has mostly been factored into credit costs. BAF continues to hold contingent provisions of Rs. 1,000 crore, which accounts for 0.5% of AUM.

Outlook

We believe BAF is poised to deliver superior profitability with a PAT CAGR of 40% over FY22-24E and sector-leading ROA/ ROE of 4.8%/ 23% in FY24E. At the CMP, the stock trades at 7.3x and 5.9x its FY2023E/FY2024E ABV. We reiterate BUY on Bajaj Finance with a PT of Rs. 8,500.

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