Buy Bajaj Finance; target of Rs 1150: Prabhudas Lilladher

Moneycontrol • 11 days ago

Original source

Key Investment Pillars

  • AUM growth: Bajaj Finance is expected to deliver 26% AUM growth in FY27E, driven by strong momentum in mortgages and consumer finance, with a focus on deeper customer penetration, wider distribution, and FINAI-led lending opportunities.
  • NIM compression: NIM is expected to face marginally higher compression than earlier guidance due to rising funding costs, with management expecting NIM compression to be marginally higher than the earlier 10-15bps guidance.
  • Credit cost outlook: The credit cost outlook remains supportive, with management expecting credit costs to exit at the lower end of the guided range, and a macro-economic overlay of INR3.4bn created to strengthen balance-sheet resilience.
  • Fee-income growth: Fee-income growth is expected at 15-18% over the medium term, despite potential IRDAI commission draft headwinds.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for: AUM growth trajectory, NIM trends, credit cost performance, fee-income growth, and balance-sheet resilience over the next 12 months. Key signals include:

  • AUM growth: Sustained growth in AUM, particularly in mortgages and consumer finance.
  • NIM: NIM compression and the company's ability to manage funding costs.
  • Credit costs: Credit cost performance and the company's ability to maintain a resilient balance sheet.
  • Fee income: Fee-income growth and the company's ability to navigate regulatory headwinds.