Bajaj Finance Shares Could Surge Another 24%; Emkay Forecasts

“The brokerage based this 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 under performed 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.

Bajaj Finance has expanded its product portfolio, expecting new offerings to contribute 6-7% to consolidated asset under management (AUM) over the next five years, counteracting yield pressure from increased mortgage in AUM mix.

Overall, Emkay anticipates a consolidated AUM CAGR of 25% from FY24-27E, reaching ₹6.5 trillion, with a Profit After Tax (PAT) CAGR of 21.4% (improving to ₹26,200 crore) by FY27E. RoA may slightly dip due to rising mortgage in AUM mix.

Bajaj Finance stock has lagged Nifty due to various factors including RBI actions, management transition concerns, competition from major players in the consumer financing sector, and Bajaj Housing Finance's inclusion in the RBI's Upper Layer. Emkay expects resolutions for most of these issues within a year.

"With resolutions for most of these issues likely within the next one year, the correction in Bajaj Finance's shares provides an attractive entry point, given that the execution machine of the company is as effective as ever and that it is well on track to deliver its ‘Long Range Strategy’ targets (i.e. superior growth and profitability with regard to financial services)," Emkay said.

On April 23, Bajaj Finance’s stock closed at ₹7,241 on the NSE, down 0.70% from the previous session. The benchmark Nifty closed 31.60 points, or 0.14%, higher at 22,368. Out of the 38 analysts that have coverage on Bajaj Finance, 31 of them have a 'Buy' recommendation, four have a 'Hold' call while three have a 'Sell' rating.