BAJFINANCE - Investment Analysis: Buy Signal or Bull Trap?

Last Updated Time : 19 Sept 25, 2:16 pm

Investment Rating: 4.1

💼 Long-Term Investment Analysis: Bajaj Finance Ltd. (BAJFINANCE)

Bajaj Finance is a leading NBFC with a strong track record of growth, profitability, and innovation. While its valuation is rich, its fundamentals support long-term compounding.

✅ Strengths

ROE: 18.5% & ROCE: 11.5% — solid return metrics for a lending business.

PEG Ratio: 1.25 — suggests reasonable valuation relative to growth.

EPS: ₹28.0 — backed by consistent quarterly PAT growth (+21.5% QoQ).

Low NPA profile and strong digital lending infrastructure.

MACD: +28.8 & RSI: 70.1 — bullish technical momentum.

Price above 50-DMA & 200-DMA — confirms trend strength.

FII inflows (+0.26%) — foreign investors are accumulating.

⚠️ Risks

High P/E: 40.4 vs Industry PE: 24.0 — premium valuation.

Debt-to-equity: 3.13 — typical for NBFCs, but requires monitoring.

DII outflows (−0.26%) — slight domestic caution.

Book Value: ₹142 vs CMP ₹998 — trading at ~7x book value.

RSI near overbought zone (70.1) — potential short-term pullback.

🎯 Ideal Entry Price Zone

Accumulation Zone: ₹880–₹920

Near 200-DMA (₹867) and below 50-DMA (₹927).

Offers a better margin of safety given valuation and technical resistance.

🧭 Exit Strategy / Holding Period

If you're already holding Bajaj Finance

Holding Period: 3–5 years, ideal for long-term compounding.

Exit Triggers

ROE drops below 15% or PEG rises above 2.5 without earnings growth.

Price crosses ₹1,050–₹1,100 without EPS expansion (profit booking zone).

Regulatory headwinds or asset quality deterioration.

Partial profit booking near ₹1,050 is advisable if valuation stretches without fundamental support.

🪙 Dividend Perspective

Yield: 0.44% — modest, not a primary driver of returns.

Capital appreciation remains the core thesis.

📌 Summary

Bajaj Finance is a high-quality NBFC with strong growth, profitability, and digital leadership. It’s a solid long-term candidate if accumulated near ₹880–₹920. Monitor valuation, asset quality, and regulatory trends for optimal entry and exit.

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