Bajaj Finance’s share price was on the climb on Wednesday after the non-finance banking company received an upbeat recommendation ahead of its results.

What Happened: Emkay Research initiated coverage on Bajaj Finance with a “buy” recommendation and set a target price of ₹9,000, reflecting a 23.4% increase from its current market value.

The brokerage is optimistic due to Bajaj Finance’s consistent strategic execution, robust operational capabilities and its proactive approach in addressing immediate challenges.

Emkay noted that Bajaj Finance shares have seen a significant underperformance in recent years. However, with the company progressing well on its “long range strategy”, especially in expanding its customer base to 83.6 million customers and its assets under management (AUM) to 3.8%-4% of retail credit/3%-3.25% of overall credit, the current valuation dip offers a compelling investment opportunity.

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Bajaj Finance has broadened its product lineup, aiming for these new offerings to make up 6%-7% of the consolidated asset under management over the next five years. This will help counterbalance the yield pressure stemming from the growing mortgage in the AUM mix.

Strong Predictions: Emkay projects a consolidated AUM compound annual growth (CAGR) of 25% from FY24-27, with a profit after tax CAGR of 21.4%, reaching Rs 26,200 crore by FY27E. However, the return on assets might see a slight decline due to the increasing mortgage in the AUM mix.

The Bajaj Finance stock has trailed behind the Nifty due to multiple reasons such as regulatory actions by RBI, concerns over management transition, competition from leading players in consumer finance and the inclusion of Bajaj Housing Finance in the RBI’s upper-layer categorisation. Emkay believes that most of these issues will likely be resolved within a year. The housing finance arm is set to be listed publicly soon.

Price Action: Bajaj Finance’s share price was up 0.85% at ₹7,321.60 in morning trade on Wednesday.

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