Can Bajaj Finance Sustain 20% CAGR? Here’s What Jefferies, Morgan Stanley, and Others Say

Synopsis: The shares of this company rose about 4.89 percent after Q4 results, with strong revenue and earnings growth supporting ~20 percent CAGR outlook, while brokerages remain divided on valuation, growth sustainability, and credit cost trends.

The share of this company, which offers offering a wide range of lending products, including consumer finance, mortgages, personal loans, and SME loans, came into focus after healthy Q4 numbers.

With a market capitalization of Rs 5,84,648 crore, Bajaj Finance Ltd’s shares on Thursday made a day high of Rs 975.50 per share, up by 4.89 percent from its previous day’s close of Rs 929.95 per share. The share of the company gave a return of 72 percent over the last five years.

Results Overview

• QoQ View: Revenue from Operations increased from Rs 21,013.49 crore in Q3 FY26 to Rs 21,605.79 crore in Q4 FY26, reflecting a growth of around 2.8 percent. Profit Before Tax rose from Rs 5,431.10 crore in Q3 FY26 to Rs 7,409.84 crore in Q4 FY26, up by about 36.4 percent. Meanwhile, Profit After Tax increased from Rs 4,066.01 crore in Q3 FY26 to Rs 5,553.30 crore in Q4 FY26, registering a growth of nearly 36.6 percent. 
• YoY View: Revenue from operations increased from Rs 18,294.45 crore in Q4 FY25 to Rs 21,605.79 crore in Q4 FY26, reflecting a growth of around 18.1 percent. Profit Before Tax rose from Rs 5,647.38 crore in Q4 FY25 to Rs 7,409.84 crore in Q4 FY26, up about 31.2 percent.  Meanwhile, Profit After Tax increased from Rs 4,545.57 crore in Q4 FY25 to Rs 5,553.30 crore in Q4 FY26, registering a growth of nearly 22.2 percent. 
• Fiscal year comparison: Revenue from operations increased from Rs 68,805.71 crore in FY25 to Rs 81,982.38 crore in FY26, reflecting a growth of about 19.2 percent. Profit Before Tax rose from Rs 22,079.63 crore in FY25 to Rs 25,816.65 crore in FY26, up around 16.9 percent. 
• Profit After Tax increased from Rs 16,779.48 crore in FY25 to Rs 19,332.36 crore in FY26, registering a growth of nearly 15.2 percent. Earnings per share improved from Rs 26.89 in FY25 to Rs 30.60 in FY26, reflecting a rise of about 13.8 percent. 

Brokerage’s View

Jefferies maintains a Buy rating on Bajaj Finance with a target price of Rs 1,210, implying an upside of 28.8 percent, supported by strong AUM growth, improving credit quality, and steady profit expansion outlook.

• AUM Growth Driving Strong Earnings Visibility: Jefferies highlights that around 22 percent AUM growth is a key driver of Net Interest Income expansion, reflecting strong underlying demand and consistent loan book scaling. This growth trajectory supports steady earnings momentum and strengthens visibility for sustained profitability over the medium term.
• Credit Quality Improvement and Strong Profit Outlook: The brokerage notes improving credit quality with additional overlay provisions strengthening the balance sheet buffer. Management has guided for 22–24 percent AUM growth, which is expected to support around 20 percent profit CAGR over FY26–FY29, indicating a stable and high-quality growth cycle.

Morgan Stanley maintained an Overweight rating on Bajaj Finance with a target price of Rs 1,120, citing strong earnings visibility, resilient asset quality, and improving growth momentum, supporting a positive long-term outlook.

• Strong Q4 and Earnings Quality Driving Confidence: Morgan Stanley highlighted Bajaj Finance’s strong Q4 performance along with a constructive management commentary, indicating sustained business momentum. The brokerage expects continued support from improving asset quality trends, which are likely to act as a key tailwind for earnings in FY27.
• Valuation Upside and Return Profile Strengthening: The outlook also suggests potential for a P/E re-rating, supported by improving earnings visibility and stable credit performance. Morgan Stanley estimates FY27 Return on Assets (ROA) at around 4.6 percent, reflecting strong profitability and reinforcing the stock’s long-term earnings compounding story.

Macquarie maintained an Underperform rating on Bajaj Finance with a target price of Rs 860, citing concerns on valuation and growth sustainability. It highlighted that the PAT beat was driven by lower credit costs, while FY27 guidance appears aggressive with limited visibility on return on assets improvement. 

• Earnings Quality Driven Beat: Macquarie noted that the PAT beat was mainly driven by lower credit costs, indicating improved near-term earnings quality rather than broad-based operating strength. While this supported profitability in the quarter, it also suggests that part of the upside was cost-led rather than driven by core revenue acceleration.
• Valuation Concerns and Growth Outlook: The brokerage highlighted concerns around the sustainability of growth and return on assets, especially given aggressive FY27 guidance. It also flagged valuation at around 4.1x price-to-book as expensive, implying limited margin of safety despite near-term earnings strength.

Bernstein maintained an Underperform rating on Bajaj Finance with a target price of Rs 840, noting that while credit costs are easing, concerns around growth and valuations persist. 

• Lower credit costs offset weakness in NII: Bernstein highlighted that despite some pressure on Net Interest Income, lower credit costs are acting as a key buffer, helping support overall earnings stability. This cost moderation is cushioning margin impact and keeping profitability trends resilient.
• Asset quality improvement and earnings outlook: The brokerage also pointed to improving asset quality trends, which are reducing risk perception and supporting balance sheet strength. Importantly, it expects earnings growth to potentially exceed AUM growth guidance, indicating better-than-expected operating leverage and sustained earnings momentum going forward.

Conclusion

Bajaj Finance’s strong Q4 performance, steady AUM expansion, and improving asset quality continue to support a ~20 percent CAGR growth narrative, backed by healthy operating momentum and resilient credit trends. 

However, brokerages remain split, with optimism around earnings visibility and operating leverage on one side, while concerns over valuation, moderation in credit costs, and sustainability of high growth guidance limit consensus. Overall, the stock remains a high-quality compounding story, but re-rating will depend on consistent execution and clarity on growth durability.

About the Company

Bajaj Finance Limited is India’s largest non-banking financial company (NBFC), offering a wide range of lending products including consumer finance, mortgages, personal loans, and SME loans. Part of the Bajaj Finserv group, it serves over 69 million customers and offers services like EMI cards, fixed deposits, and insurance.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Can Bajaj Finance Sustain 20% CAGR? Here’s What Jefferies, Morgan Stanley, and Others Say appeared first on Trade Brains.