Sharekhan's research report on AU Small Finance Bank
AU Bank reported Q4FY2022 PAT at Rs. 346 crore, which was ahead of street expectations (Rs.320 crore). PAT grew by 105% y-o-y/15% q-o-q due to strong growth in net interest income and lower tax rate (due to refund adjusted). NII grew by 43% y-o-y/14% q-o-q, aided by reduction in cost of funds and strong AUM growth of 27% y-o-y. Incremental cost of funds during the quarter was 5.3%. NIM remained stable at 6.3% q-o-q. Asset quality significantly improved during the quarter with both GNPA and NNPA ratios falling by 62 bps q-o-q and 79 bps q-o-q to 1.98% and 0.5%, respectively. PCR stood at 75% in Q4FY2022 versus 51% in Q3FY2022. The stock is currently trading at 5.2x/4.4x its FY2023E and FY2024E ABV.
We maintain Buy with a revised PT of Rs. 1,621. We believe growth momentum would surprise on the upside and earnings are going to support rich valuations.
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