Sharekhan's research report on AU Small Finance Bank
In its analyst meet, AU Small Finance Bank highlighted its improved digital capabilities that helping it to deliver a superior customer performance and thus driving business growth. Earlier, the bank had formalised 10 strategic business units (SBUs) with independent leadership and which will operate as separate profit centres, driving growth. In the meet, the bank primarily focused on its two critical SBUs formed - Wheels and home loans. These two segments, which constitute ~37% and ~5% of the AUM respectively are key focus areas. The bank also reiterated a strong collection efficiency and credit capabilities in creating business assets. In the vehicle finance business, higher fuel prices and supply bottlenecks are near-term challenges. However, long-term growth levers remain intact with growth opportunities through expansion in new markets and customers. Though home loans contribute minimally to the AUM, it is one of the fast growing segments. At CMP, AUSFB is available at 4.2x/3.4x its FY2023E/FY2024E BPVS.
The stock price has corrected by 16% from highs of Rs. 1,421 which offers a good buying opportunity from the lower levels. We maintain Buy on the stock with an unchanged PT of Rs. 1,425.