Target: ₹1,200
CMP: ₹950.20
Bajaj Finance reported Q4FY26 PAT of ₹5,500 crore, in line with estimate, led by strong AUM growth, lower-than-expected credit costs offset by rising NIM pressure and higher employee expenses.
AUM expanded 22 per cent to ₹5.1 lakh crore, driven by broad-based traction across mortgages, consumer B2C, gold loans, securities lending, urban sales finance, commercial lending and rural sales finance segments.
Cautious stance continued in SME lending), although a revival to double-digit growth is guided by Q2-Q3FY27F. New segments such as gold loan, commercial vehicle loans and tractor loans to grow at an accelerated pace. The cross-sell franchise remained an integral feeder to personal loans, car loans and two-wheelers. Non-interest income is expected to grow 16-18 per cent.
Gross stage-3 assets ratio declined to 1.01 per cent due to broad-based easing of stress. Credit cost guidance for FY27F is 1.45-1.6 per cent. Calculated NIM stood at 9.5 per cent, while the cost of funds declined to 7.41 per cent, with a guidance of near-term moderation due to geopolitical tensions.
Bajaj Finance continues to remain a well-oiled lender, with a superior cross-sell franchise and tech stack providing an edge over peers. We remain watchful for management transition and NIM pressure. Any correction in stock price sweetens the risk-reward ratio. We maintain our Add rating with a target price of ₹1,200, corresponding to about 4.5x FY28F BV and about 23x FY28F EPS.