Bajaj Finance shares jump 3% after UBS upgrades to Neutral, hikes target price while Jefferies screams Buy

Bajaj Finance shares experienced a 3% increase on Wednesday following bullish recommendations from brokerages UBS and Jefferies, which had a positive impact on investor sentiment after a 6% decline in a month. Bajaj Finance's stock reached Rs 1,038.60, marking a weekly rise of over 3%. The stock is currently leading gains on the Sensex and Nifty indices, which are showing minor gains. Bajaj Finserv also saw a 2% increase in share price.

In response to the stock's performance, Jefferies reaffirmed its Buy rating on Bajaj Finance and set a target price of Rs 1,280, indicating a potential upside of around 27% from its previous closing price of Rs 1,009. The brokerage highlighted management's confidence in short-term and long-term growth and profitability, predicting short-term growth driven by strong demand, asset quality, and efficiencies, while long-term growth is expected to be fueled by AI investments and cost efficiencies.

On the other hand, UBS upgraded its rating for Bajaj Finance shares from Sell to Neutral and raised the target price to Rs 1,100, implying over 9% upside potential. UBS expects a strong unsecured credit growth cycle in India, supported by healthy asset quality across banks and NBFCs, low unsecured household leverage, abundant liquidity in the financial system, and a more risk-on stance from lenders.

The brokerage believes Bajaj Finance has resolved its asset quality issues in unsecured products, with an increased provision coverage ratio acting as a buffer against macroeconomic headwinds. The company's EPS growth is expected to accelerate, with a potential 30%+ increase in FY27, although it may decelerate to the high teens in FY28.

Despite a current PE ratio of nearly 23, UBS considers the stock's upside potential largely captured, maintaining a Neutral rating.