Bajaj Finance hits over 3-month high; surges 14% thus far in January

Shares of Bajaj Finance hit an over three-month high of Rs 7,786.20, gaining 2 per cent on the BSE in Wednesday's intra-day trade ahead of its Q3 results today

Shares of Bajaj Finance hit an over three-month high of Rs 7,786.20, gaining 2 per cent on the BSE in Wednesday’s intra-day trade ahead of the board meeting of the company today to consider and approve the unaudited financial results of the company for the quarter ended December 31, 2024.

 

The stock of the non banking finance company (NBFC) is quoting at its highest level since October 1, 2024. It had hit a 52-week high of Rs 7,823.85 on September 30, 2024. Thus far in the month of January 2025, Bajaj Finance has outperformed the market by surging 14 per cent. In comparison, the BSE Sensex was down 2 per cent during the period.

 

On January 3, Bajaj Finance, in its Q3FY25 business update, had informed that its assets under management (AUM) surged 28 per cent year-on-year (YoY) to Rs 3.98 lakh crore, compared to Rs 3.11 lakh crore a year earlier.

 

Bajaj Finance also reported a record-breaking increase in its customer base, which grew to 97.12 million, up from 80.41 million in the previous year—a rise of 21 per cent. Notably, the company added 5.03 million new customers in Q3FY25, marking its highest-ever quarterly increase. The company’s new loans booked during the quarter reached a record 12.06 million, up 22 per cent from 9.86 million in Q3FY24. Additionally, the deposits book grew 19 per cent year-on-year to Rs 68,800 crore as of December 31, 2024, compared to Rs 58,008 crore a year ago.

 

Meanwhile, in another development, Bajaj Finance on January 20, announced a strategic partnership with Bharti Airtel (one of India’s largest telecom services providers), to create one of India’s largest digital platforms for financial services and transform last mile delivery.

 

Bajaj Finance is one of the largest and most profitable NBFCs in the country. It continues to exhibit strong growth even on a large base and has been able to maintain its superior returns profile. The stock currently trades at a discounted valuation compared to its history and hence is due for a rerating.

 

With valuations now reasonable, analysts at CLSA expect Bajaj Finance to deliver returns that are at least in line with earnings growth. The brokerage firm maintains the stock as its top pick in the financial space with a 12-month target price of Rs 9,200 per share.

 

"Improvement in credit costs and net interest margin (NIM) stabilisation are key catalysts. While rate cuts do not make a big difference to the company's NIM, they would improve sentiment. Slowing loan growth due to a tightening in unsecured lending and further deterioration in asset quality are key risks. A change in top management is also a risk, albeit it would be a short-term one," CLSA said in a stock report.

 

Analysts at BoFA Securities, meanwhile, continue to believe that Bajaj Finance’s net profit growth should start to inflect from the third quarter. Net profit growth (YoY) has decelerated from 40 per cent to 13 per cent (in Q2FY25) over the past 7 quarters on NIM compression, higher credit costs. With NIMs stabilising/recovering and credit costs likely peaking in Q3Y25, the brokerage firm sees a trend reversal, with 17.6 per cent YoY profit after tax (PAT) growth in H2FY25 and 25 per cent in FY26. 

 

Analysts see PAT growth converging to AUM growth (BoFAe: 27 per cent) FY26 onwards. Further, operating cost efficiencies are expected to provide another upside risk to earnings, the brokerage firm said, while maintaining its ‘Buy’ rating on the stock with a target price of Rs 8,800 per share.

 

Overall, BoFA Securities believes the company's valuation is justified given Bajaj Finance’s large cross-sell opportunity with lower acquisition costs and superior credit underwriting, conservative provisioning, demonstrated cost flexibility, and diversified funding mix and favorable funding costs.