Buy Equitas Small Finance; target of Rs 110: Motilal Oswal

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Motilal Oswal's research report on Equitas Small Finance

Equitas SFB (EQUITASB) reported a 1QFY25 PAT of ~INR0.3b (-87% YoY), 85% lower than MOFSLe amid higher floating provisions, as the bank reduced its NNPA to <1% and raised PCR to >70%. These were done to gain eligibility for a universal banking license. PPoP otherwise stood in line. Advances grew 16% YoY/3.1% QoQ to INR319b, led by SBL and Housing, partly offset by a decline in MFI book as the bank took a conservative approach. Deposit growth was healthy at 35% YoY/4% QoQ, led by growth in TDs and relatively slower growth in CASA. The CASA mix moderated to 31%, while the CoF rose 2bp to 7.46%. NIM contracted 20bp QoQ to 7.97%.

Outlook

We cut our FY25E/FY26E EPS by 22.3%/ 9.1% amid higher provisions and a slight decline in the NII. We estimate an FY26 RoA/RoE of 1.9%/16.3%. Reiterate BUY with a TP of INR110 (premised on 1.7x FY26E ABV).

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Equitas Small Financei_29072024_Motilal Oswal