We upgrade our rating on BAF to BUY with a TP of INR1,300
Our investment thesis is predicated on three structural pillars: 1) The credit cycle has turned, which will enable lower credit costs and higher earnings; 2) Multiple growth engines (core lending, digital ecosystem, gold loans, new businesses for BAF) are firing simultaneously; and 3) Duration and magnitude of this new earnings cycle leave room for both earnings upgrades and valuation support. We raise our FY27/FY28 EPS estimates by 4%/2% to factor in higher AUM growth and lower credit costs. We model PAT CAGR of ~30% over FY26-FY28E and RoA/RoE of 4.2%/21.4% in FY28E. We upgrade our rating on BAF to BUY with a TP of INR1,300 (premised on 4.8x FY28E BVPS).
