Buy Utkarsh Small Finance Bank; target of Rs 70: ICICI Securities

ICICI Securities's research report on Utkarsh Small Finance Bank

Utkarsh SFB’s (Utkarsh) Q4FY24 financial performance is testimony to management’s ability to deliver as per guidance with exit RoA of ~3% and RoE at 22% despite muted H1FY24 due to sector level headwinds on both growth and asset quality. However, the management had consistently highlighted that marginal asset quality deterioration during H1FY24 was transitory, and it is committed to deliver 30% YoY growth in FY24 even after subdued 7% growth during H1FY24. We also note that management maintained a balanced approach while growing business during FY24 as reflected in 31% advance growth and 27% deposit growth. LDR stood at 94% vs 99% QoQ.

Outlook

We continue to prefer Utkarsh SFB within the SFB space considering its balanced growth approach and sharp focus on asset quality, even while growing balance sheet and profitability. Maintain BUY with an unchanged TP of INR 70, valuing the stock at 2x Sep’25E BVPS.