Bajaj Finance Gets Buy Ratings from Jefferies, Nomura, HSBC; Morgan Stanley Stays Overweight

resr 5paisa Research Team

Last Updated: 30th January 2025 - 05:21 pm

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Brokerage firms remain optimistic about Bajaj Finance following its strong December quarter results, which exceeded market expectations. Analysts project a 22% profit growth for FY26, along with a 25% increase in assets under management (AUM).

As of 9:30 AM IST, the share price of Bajaj Finanace was at ₹8,013.00 on the NSE, a 3.26% increase from previous close.

Brokerage Views on Bajaj Finance

Morgan Stanley: Overweight with a ₹9,300 Target Price

Morgan Stanley reaffirmed its Overweight rating on Bajaj Finance, increasing the target price to ₹9,300 per share. The brokerage pointed out that the lower stressed asset formation observed in Q2 continued in Q3, indicating improved asset quality. Additionally, the management has guided for lower credit costs in Q4FY25, which is expected to support earnings growth. The firm also noted that the improved visibility of over 25% EPS growth in FY26 would depend on macroeconomic factors such as interest rate movements and overall financial market conditions.

Jefferies: Buy with a ₹9,270 Target Price

Jefferies issued a Buy recommendation, setting a target price of ₹9,270 per share. The firm highlighted that asset quality trends are stabilizing, reducing concerns over credit costs. Bajaj Finance's management expects credit costs to taper off from Q4FY25, which should boost profitability. Furthermore, Jefferies believes the company is well-positioned for a smooth leadership transition, as the Deputy CEO is expected to take over while Rajeev Jain remains actively involved in strategic decisions. The firm also pointed out that Bajaj Finance's business model, with a diversified product portfolio, continues to deliver strong results, making it an attractive long-term investment.

Nomura: Buy with a ₹9,000 Target Price

Nomura also maintained a Buy call, raising its target price to ₹9,000 per share. The brokerage noted that Bajaj Finance delivered a solid performance in Q3FY25, with an 18% year-on-year (YoY) and 7% quarter-on-quarter (QoQ) profit growth. The strong earnings were supported by robust loan expansion and controlled credit costs at 2.1%. While operating profit was largely in line with expectations, profitability exceeded estimates, contributing to a return on assets (RoA) of 4% and return on equity (RoE) of 19%. Nomura emphasized that Bajaj Finance’s ability to sustain growth in a competitive lending market, along with its disciplined risk management, strengthens its long-term investment appeal.

HSBC: Buy with a ₹8,900 Target Price

HSBC upgraded its target price to ₹8,900 per share while maintaining a Buy rating. The brokerage cited strong AUM growth and better-than-expected asset quality as key positives from Bajaj Finance's Q3 performance. While HSBC made slight adjustments to its earnings estimates, it remains bullish on the company’s prospects and has raised its price-to-book value (P/BV) multiple to 5x for FY26. HSBC believes Bajaj Finance’s ability to scale its operations efficiently, maintain healthy margins, and manage risks effectively justifies a valuation premium over its peers.

Key Factors Driving Positive Sentiment

Strong Profitability and Growth Outlook: The company’s solid financial performance, supported by a well-diversified loan book, indicates resilience even in a challenging macroeconomic environment. The projected 22% profit growth in FY26 and 25% AUM expansion highlight strong future prospects.

Stable Asset Quality: Analysts across brokerage firms noted that Bajaj Finance’s asset quality trends are stabilizing, reducing concerns over rising credit costs. The sustained lower stressed asset formation and management’s guidance for declining credit costs in Q4FY25 further strengthen this outlook.

Smooth Leadership Transition: With the expected elevation of the Deputy CEO and Rajeev Jain’s continued involvement, analysts believe the company’s leadership transition will be seamless, ensuring strategic continuity.

Premium Valuation Justification: Brokerages like HSBC emphasized that Bajaj Finance’s superior financial metrics, risk management, and growth potential warrant a higher valuation compared to its industry peers.

Bajaj Finance’s impressive Q3FY25 performance and optimistic growth projections have reinforced confidence among analysts. With multiple brokerages maintaining Buy ratings and raising their target prices, the stock appears well-positioned for continued gains. Investors will closely monitor credit cost trends and macroeconomic conditions, but the company’s strong fundamentals and strategic direction suggest a positive long-term trajectory.

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