Bernstein has reiterated an Underperform rating on Bajaj Finance, assigning a target price of ₹640 per share, which implies a sharp downside of over 33% from the current market price of ₹956.50.
The brokerage highlighted that while Q1FY26 EPS grew 20%, largely supported by a 25% year-on-year AUM growth, this was overshadowed by concerns on asset quality and profitability. Credit costs for the quarter stood elevated at 202 basis points, exceeding the company’s guided range of 185–195 bps, which Bernstein sees as an early signal of growing pressure in the lending book.
Return on assets (RoA) came in at 4.5%, landing in the middle of the recently downgraded range by management. Bernstein flagged this as a concern amid declining loan spreads and tighter margins going forward.
The brokerage expects further profitability challenges in the medium term as competitive pressures and cost of funds continue to weigh on performance, particularly in the MSME and SME segments.
Disclaimer: The views expressed in this article are those of the brokerage firm (Bernstein) and do not constitute investment advice. Investors are advised to consult a certified financial advisor before making any investment decisions.
