Emkay Research has initiated coverage on Bajaj Finance with a "buy" call and a target price of Rs 9,000, which is 23.4 percent higher than the stock's current market price.
The brokerage based its positive outlook on three key factors: flawless execution of strategic plans, strong execution capabilities, and proactive identification and resolution of near-term challenges. The company's 3i execution strategy — Invent, Innovate, Imitate — positions it well to achieve consolidated strong earnings, it said.
"Bajaj Finance shares have materially underperformed in the past few years and, as the company continues to make good progress on its ‘Long Range Strategy’ in terms of advancing its customer franchise (83.6mn) and AUM (3.8-4% of retail credit/3-3.25% of overall credit), the recent correction (in last 2yr) in valuations provides an attractive entry point," Emkay said in a report on April 23.
BAF has expanded its product portfolio, expecting new offerings to contribute 6-7 percent to consolidated assets under management over the next five years, counteracting yield pressure from increased mortgages in the AUM mix.
Overall, Emkay anticipates a consolidated AUM CAGR of 25 percent from FY24-27E, reaching Rs 6.5 trillion, with a PAT CAGR of 21.4 percent (improving to Rs26,200 crore) by FY27E. RoA may slightly dip due to rising mortgage in the AUM mix.
The Bajaj Finance stock has lagged behind Nifty due to various factors: RBI actions, management transition concerns, competition from major players in consumer financing, and Bajaj Housing Finance's inclusion in the RBI's Upper Layer. Emkay expects resolutions for most issues within a year.
The correction offers an appealing entry point, considering BAF's strong execution and progress towards its growth and profitability targets in financial services, it said.
On April 23, the stock closed at Rs 7,241 on the National Stock Exchange, down 0.70 percent from the previous session. The benchmark Nifty closed 31.60 points, or 0.14 percent, higher at 22,368.
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