On Thursday, Kotak analysts reinstated coverage on Bajaj Finance (NS:BJFN) Ltd. (BAF:IN) with an 'Add' rating and set a price target of INR 8,000.00. The firm's analysts predict that Bajaj Finance will experience over 25% growth in its loan book over the next three years. However, they caution that the near term might see asset quality issues, particularly within the unsecured loan segment.
The analysts have constructed a forecast that anticipates a 24% compound annual growth rate (CAGR) in earnings for the fiscal years 2025 to 2027. This projection factors in a slight compression in net interest margins (NIM), which is expected due to changes in the product mix offered by the company.
Bajaj Finance itself has provided guidance for an 18-22% earnings CAGR from the fiscal year 2024 to 2029. The company aims to expand its customer base significantly during this period, targeting an increase to 200 million customers from the 84 million reported in the fiscal year 2024.
The Kotak analysts' outlook is based on the company's strategic focus on growing its customer franchise and the anticipated robust loan book growth. They believe that despite the anticipated challenges, Bajaj Finance is poised for substantial earnings growth in the coming years.
The reinstatement of coverage by Kotak with a positive rating and a strong price target reflects their confidence in Bajaj Finance's growth trajectory and strategic initiatives. The company's stock performance and investor sentiment in the coming months will likely be influenced by its ability to manage asset quality and achieve the projected growth rates.
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