Sharekhan's research report on AU Small Finance Bank
Most importantly, the management was confident on the asset quality trends across its business verticals and laid down the road map for the merged entity over the next three years. Credit cost across business verticals are converging to pre-COVID levels. In the credit cards business, the effect of recalibration in underwriting is visible in early delinquency data for newer origination RoA/RoE to improve gradually over the next 3 years for the merged entity. The stock is currently trading at 2.2x/1.9x its FY2025E/FY2026E ABV.
Outlook
We retain a Hold rating on AU SFB with a revised PT of Rs. 700. Near term focus remains on smooth integration with all the verticals of Fincare SFB.
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