Bajaj Finance, a leading non-banking financial company (NBFC) in India, has unveiled its ambitious BAF 3.0 Strategy for 2025-2029. Despite a 11% drop from its September 2024 high and a negative 5% return over the past year, experts believe the stock’s valuation presents an intriguing opportunity for investors.
Key Highlights
- Current Price: ₹6,924.15 (as of December 11, 2024).
- Valuation:
- MOFSL: 3.7x P/BV and 20x FY26 EPS.
- ICICI Securities: Valuation at 4.7x FY26E BVPS.
BAF 3.0 Strategy: Unlocking Growth Potential
1. Focus Areas:
Bajaj Finance identified 28 megatrends, with three new additions:
- Green Finance: Initial focus on financing solar and EV products, targeting ₹2,000 crore in FY26.
- Multi-Cloud: Leveraging advanced cloud infrastructure to streamline operations.
- Zero Trust Security: Comprehensive security measures to be implemented by FY26.
2. Generative AI Integration:
The deployment of Generative AI across 29 workstreams is expected to result in:
- Annual opex savings of ₹150 crore from FY26 onward.
- Enhanced customer engagement and operational efficiency.
3. Growth Targets:
- Aiming for ₹4 lakh crore in AUM by FY25.
- Disbursement of over 4 crore loans and expansion to a 10 crore customer franchise.
- Strengthening leadership in personal loans, gold loans, MSME financing, and two-wheeler loans.
Expert Opinions
Motilal Oswal Financial Services (MOFSL)
- Rating: Neutral
- Target Price: ₹7,500
- Analysis:
- Attractive valuation but limited upside catalysts in the near term.
- Challenges include navigating asset quality issues in the B2C loan book and increasing the proportion of secured loans.
ICICI Securities
- Rating: Buy
- Target Price: ₹8,500
- Analysis:
- Valued at 4.7x FY26E BVPS, with ₹1,450 attributed to housing subsidiaries.
- Believes Bajaj Finance’s innovation and robust growth strategy will support long-term performance.
Key Risks and Opportunities
Risks:
- Asset quality challenges in unsecured loan segments.
- Rising competition in MSME and retail lending spaces.
Opportunities:
- Strong leadership in financial services with innovative technology integration.
- Focus on emerging segments like green finance and digital transformation.
- Cost savings from AI adoption and operational streamlining.
Investment Outlook
With a focus on innovation, technology, and expansion into emerging areas like green finance, Bajaj Finance is well-poised for long-term growth. However, the immediate upside may be limited due to asset quality concerns and market volatility. Investors looking for robust returns by 2025 may find the stock’s current valuation attractive for strategic entry.
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