Bajaj Finance shares at ‘good entry point’, say analysts post underperformance, attractive valuations #CashNews.co

Shares of Bajaj Finance Ltd. were trading with gains of as much as 7% on Wednesday, October 23, following the company’s September quarter performance.

Bajaj Finance reported near-stable asset quality performance in the quarter, with a marginal increase in its annual credit cost guidance.

The non-banking financial company has raised its FY25 credit cost guidance to 2.05% from an earlier estimate of 1.75%-1.85%.

Global brokerage firm Morgan Stanley has an ‘Overweight’ rating on the Bajaj Finance stock, with a price target of ₹9,000 per share.

According to the management, both funding costs and credit costs have likely peaked.

The brokerage also mentioned that the NBFC’s stressed asset (Stage 2 +3) creation has also declined quarter-on-quarter.

There will be skepticism given rising system asset quality issues; however, the brokerage said that an attractive valuation and a recent sharp underperformance presents a good entry point.

Jefferies has maintained a ‘Buy’ rating, with a price target of ₹8,400 per share.

The foreign brokerage said the second quarter of FY25 was largely in-line with estimates, with a 29% growth in assets under management (AUM) but profit growth lagging at 13% year-on-year at ₹4,000 crore due to a surge in credit costs.

Stability in net interest margins was a key positive and if credit costs stabilise, as the management guided, would help Bajaj Finance revert to over 20% earnings growth from FY26, Jefferies said.

The company is expected to benefit from new product launches and easing rates.

Jefferies also said that Bajaj Finace’s valuations remain reasonable at 3.8 times its financial year 2026 price-to-book and 20 times price-to-earnings.

In an interaction with CNBC-TV18, Deven Choksey of DRChoksey Finserv believes that the performance of the company remains in their growth trajectory, in which the company is operating, the different verticals in which they are lending the finance, including the New Age verticals.

“I think the storage batteries — this is going to be a new game, which is going to be played by slice of Bajaj Finance, where probably you are likely to see the larger portfolio emerging out of even the financing of batteries probably even vehicles,” Choksey added.

Bajaj Finance shares have materially underperformed the Nifty index in the last 12 months.

Following the listing of Bajaj Housing, standalone Bajaj Finance shares are trading at FY26E P/B of 3.7 times, Emkay said in a research note.

Given the 4% return on asset and over 20% return on equity along with the 20% earnings growth still intact, the brokerage has reiterated a ‘Buy’ rating on the stock. However, Emkay has revised its price target on the counter down to ₹8,800 from ₹9,300 per share earlier.

Shares of Bajaj Finance Ltd. are up to the highest point of the day, currently trading 6% higher at ₹7,098.85. The stock has fallen 3% so far this year.