Bajaj Finance - Value Emerging; Upgrade To 'Buy': HDFC Securities

HDFC Securities Institutional Equities

Despite the rising scale and complexity of its operations, Bajaj Finance Ltd. has continued to deliver a healthy ~26% assets under management compound annual growth rate from FY22-FY24E.

This growth is largely attributed to a rebound in the acquisition engine through an omni-channel strategy, enhanced cross-sell of loans and other products, and the addition of new verticals.

Despite the Reserve Bank of India-imposed embargo on Insta EMI cards and e-commerce loans (~4-5% of disbursements) and higher risk weights, we expect Bajaj Finance to deliver on key metrics although the near-term growth is likely to taper off moderately.

Given the dislocation in the stock price relative to the quality of the franchise and its earnings, we upgrade Bajaj Finance from 'Add' to 'Buy', with an RI-based target price of Rs 8,650 (implied 5.4 times September-25 adjusted book value per share).

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