Bajaj Finance Remains Top Pick for Jefferies and CLSA: Here’s Why
Jefferies and CLSA have retained Bajaj Finance Ltd. shares as their top picks despite the company’s disappointing asset under management and growth guidance, as well as rising credit cost. The stock is expected to yield decent returns to shareholders, which is why it has retained its preference from top brokerages.
CLSA’s Outperform Rating
CLSA has an Outperform rating on Bajaj Finance, with a target price of Rs 1,200, up from Rs 1,150 apiece. This implies an 11% upside potential from current levels. The brokerage firm believes that the stock was long overdue for a rally, having languished throughout 2024. At 26 times financial year 2027, the price-to-earnings (PE) ratio is now at a 10-12% discount to its pre-COVID multiple.
CLSA sees shareholders benefitting from strong earnings-per-share compounding. The brokerage firm notes that there are very few large-cap stocks that offer such compounding. To learn more about large cap stocks and their benefits, click here.
Jefferies’ Buy Rating
Jefferies has retained its ‘Buy’ rating on Bajaj Finance, with a target price of Rs 1,270 apiece, up from Rs 1,100 apiece. This implies a 17% upside from Monday’s close price. The brokerage firm’s estimate for the company’s net profit over financial years 2025 and 2028 remains unchanged, with a projected 23% compound annual growth rate (CAGR).
Jefferies believes that Bajaj Finance continues to be amongst the best platforms for consumption spending and commercial finance, which is why the stock remains one of its top picks. For more information on consumption spending and its impact on the stock market, click here.
Q2 Earnings Review
Bajaj Finance’s net profit rose 21.9% to Rs 4,875 crore, versus a profit estimate of Rs 4,969 crore. The company’s net interest income (NII) rose 22% to Rs 10,785 crore, versus an estimate of Rs 10,955 crore.
The company’s credit cost rose 3 basis points sequentially to 2% due to higher net slippage. Bajaj Finance’s net slippage rose 80 basis points on the quarter to 2.9%. The non-banking financial company’s net stage 2+3 formation improved to 1.96%.
Growth Guidance Reduction
Bajaj Finance has reduced its growth guidance by 100 basis points to 22-23%, due to weaker trends in the SME and housing segments. The company’s management has guided a credit cost of 1.85-1.95% for the entire financial year 2026.
CLSA has cut its net profit estimate for the period calendar year 2026 and 2028 by 2% due to the low loan growth guidance. The brokerage firm has trimmed its estimate for loan growth by 2% to 22-23%.
Investment Strategy
Despite the reduction in growth guidance, Bajaj Finance remains a top pick for Jefferies and CLSA. The stock is expected to yield decent returns to shareholders, driven by its strong earnings-per-share compounding. Investors can consider investing in the stock for the long term, with a target price of Rs 1,200-1,270 apiece.
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