Jefferies raises target price for Bajaj Finance after growth in loans

Assets Under Management (AUM) grew 32 percent year-on-year in the Aptil-June quarter. AUM is the total value of all the financial assets in a company.

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Jefferies has raised its target price on Bajaj Finance, the non-banking finance company (NBFC), to Rs 9,500, while maintaining a buy call on the stock in its latest report. This is after the company announced its business update for the quarter which showed that the company saw a 34 percent year-on-year growth in new loans.

Although there were concerns about unsecured loans being a significant source of profit for Bajaj Finance, the percentage of unsecured loans in the company’s overall portfolio has stayed relatively consistent over the past five years, at around 40-42 per cent. Bajaj Finance intends to increase the scale of unsecured small medium enterprises segment, which is currently unpenetrated.

Jefferies expects the lender’s two-wheeler loans to non-Bajaj Auto customers to be of the same size as compared with 2-wheeler loans for the next three years. In the new and used car loans and tractor financing are additional levers to the vehicle loans portfolio for Bajaj Finance.

Jefferies expects Bajaj Finance’s Earnings Per Share (EPS) to grow at a CAGR of 29 percent over FY23-25. EPS CAGR or compounded annual growth rate is the rate at which EPS will grow every year. The brokerage house expects AUM to grow at a CAGR of 29 percent over FY23-25.?

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Assets Under Management (AUM) grew 32 percent year-on-year in the April-June quarter. AUM is the total value of all the financial assets in a company.

Bajaj Finance added 1.15 million new customers in FY23. In the Q1FY24 the company added 38 lakh new customers.

“Bajaj Finance’s digital strategy, after a slow start, is now falling in place with clear targets with respect to payments market share, merchant lending, digital spends. And given the strong execution track record, we expect Bajaj Finance to emerge as a player to reckon within the space over the next 3-5 years,” said Jefferies.

The lender’s total revenue increased 30 percent year-on-year to Rs 41,405 crore in FY23. Bajaj Finance net profit grew 63 percent year-on-year to Rs 11,507 crore in the same period. EBITDA margins for the bank increased 694 basis points year-on-year in FY23.

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