Bajaj Housing Finance Share Price continued with uptrend on second day of the listing on the bourses. Bajaj Housing Finance has strong fundamentals and the stock could offer good returns to long term investors. The IPO offered 114% return on yesterday's listing on exchanges. The stock has now received its first BUY recommendation from Singapore based research house PhillipCapital.

PhillipCapital has initiated coverage on Bajaj Housing Finance, a newly listed non-banking financial company (NBFC), with a 'Buy' recommendation. Setting a target price of Rs 210 per share, this represents a 27% upside from the stock’s Rs 165 closing on Monday. Bajaj Housing Finance’s strategic focus on salaried home loans, lower expense ratios, and strong return metrics underpin this positive outlook. The company’s synergy with its parent, Bajaj Finance, its innovative product offerings, and efficient scaling have positioned it as a key player in the housing finance sector. Investors are advised to consider this stock for long-term growth.

PhillipCapital Issues 'Buy' Call on Bajaj Housing Finance

PhillipCapital initiated coverage on Bajaj Housing Finance, giving the stock a target price of Rs 210 per share. This signifies a potential 27% upside from the recent closing price of Rs 165, following its strong market debut.

Strategic Focus on Salaried Home Loans Enhances Profitability

Bajaj Housing Finance’s focus on salaried home loans, which account for around 90% of its portfolio, has allowed the company to maintain a lower expense ratio. This segment provides a stable, low-risk customer base, improving the company's overall efficiency and profitability.

Synergy with Parent Company Bajaj Finance Boosts Returns

Approximately 40% of Bajaj Housing Finance’s home loans are sourced from Bajaj Finance’s customer base. This synergy enhances the return ratios, placing Bajaj Housing Finance ahead of many of its competitors in terms of profitability.

Top-up Home Loans: A Competitive Advantage

A distinguishing factor for Bajaj Housing Finance is its offering of top-up home loans in addition to the original loans. This innovation boosts its yield in a highly competitive market, giving it an edge over peers.

Scaling of AUM: Closing in on Key Competitors

The company is expanding its Assets Under Management (AUM) per branch, closing the gap with key players like LIC Housing Finance. Additionally, its AUM per employee is comparable to Can Fin Homes, indicating operational efficiency.

Lower Borrowing Costs and Superior Risk-Adjusted Spreads

Bajaj Housing Finance enjoys better borrowing costs than Can Fin Homes, which, combined with its lower risk-adjusted spreads, is reflected in a strong Return on Equity (RoE).

Strong Return on Assets and Equity Expected

PhillipCapital projects Bajaj Housing Finance’s Return on Assets (RoA) and Return on Equity (RoE) to exceed 2% and 12%, respectively, for the FY25-27 period. The company's prudent approach to building a low-risk balance sheet is expected to keep credit costs benign in the near term.

Long-term Potential for Improvement in Expense Ratios

As Bajaj Housing Finance continues to scale, PhillipCapital anticipates further improvements in the company’s expense ratios. This could lead to even stronger return ratios in the future, reinforcing its long-term growth potential.

Stock Performance: A Strong Market Debut

The stock closed at Rs 165, marking a 135% premium over its IPO allotment price of Rs 70 per share. PhillipCapital’s target price of Rs 210 indicates further upside, encouraging investors to consider the stock for long-term growth.

Investment Recommendation for Long-term Investors

Analysts suggest that those who missed out on the Bajaj Housing Finance IPO could still consider investing, especially with a long-term outlook. The stock offers potential for sustained growth, particularly for those with a higher risk tolerance and long-term investment goals.