Bajaj Finance Ltd. stock got a target price hike from Jefferies that said that an improvement in bounce rate should help bring down credit costs from the third quarter, after meeting with the company's management.
Bounce rate refers to the rate of missed EMI installments by the customers.
"The non-bank lender has tightened standards on new loans and we expect moderation in loan growth from 31% now towards 25-26%," Jefferies said in a note. It raised the target price for Bajaj Finance stock from Rs 7,780 apiece to Rs 8,410 per share, implying a 16% potential upside from Thursday's closing.
Moderation in credit costs and stability in net interest margins will improve earnings trend from the December quarter, the brokerage said.
The firm sees 16% growth in profit in the current fiscal, which will improve to 25-27% on a compounded annual basis over the next three years.
Shares of Bajaj Finance advanced 2% before paring gains to trade 1.6% higher at Rs 7,362 per share at 9:45 a.m., compared to a 0.6% decline in the NSE Nifty 50.
The stock has declined 0.5% in the last 12 months and 1% year-to-date. Total traded volume so far in the day stood at 3.2 times its 30-day average. The relative strength index was at 68.
Twenty five out of 35 analysts tracking Bajaj Finance have a 'buy' rating on the stock, five recommend a 'hold' and five suggest a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 9.1%.
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