HSBC raises Bajaj Finance stock price target, upgrades to Buy rating

HSBC has upgraded shares of Bajaj Finance Ltd (BAF: IN) from Hold to Buy, increasing the price target to INR7,740 from INR7,080. The financial institution cites an attractive valuation that doesn’t account for potential recovery.

Bajaj Finance’s standalone business is currently trading at 3.6 times the estimated book value per share (BVPS) for the fiscal year 2026 and 19 times the estimated price-to-earnings (PE) for the same period.

HSBC forecasts a compound annual growth rate (CAGR) of 21% in earnings per share (EPS) for Bajaj Finance from the fiscal year 2024 to 2027. The bank also predicts an average return on assets (RoA) of 3.9% and a return on equity (RoE) of 20-21% during this period. The optimism is partly based on the expectation that the company’s stock price may increase at the rate of EPS growth once the current phase of weaker earnings has concluded.

The upgrade reflects the belief that the market has not fully recognized the potential for improvement in Bajaj Finance’s asset quality and credit costs. HSBC suggests that there could be upside risks to their estimates if there is a sharp normalization in these areas.

The new price target of INR7,740 is based on a valuation of 4.4 times the forecasted BVPS for the fiscal year 2026.

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