HDFC Securities is bullish on AU Small Finance Bank has recommended buy rating on the stock with a target price of Rs 725 in its research report dated August 10, 2019.
HDFC Securities' research report on AU Small Finance Bank
Our recent interaction with the top management of AUBANK, at their first analyst day, bolsters our constructive stance. Management’s intent to eventually convert into a full-fledged bank, via granular growth, was visible (AUBANK has to remain an SFB for at least ten more quarters). A book accretive fund raise is likely (though not immediately). Current asset quality trends are inspiring, amidst a bleak landscape. Increasing granularity will only help. Oplev (key to our anticipated RoAA expansion) has kicked in recently and is sustainable, in our view.
Valuations are rich, but likely to persist so long as asset quality and growth hold up. Maintain BUY. Our SOTP-based TP is Rs 725 (4.75x Jun-21E ABV of Rs 148 + Rs 19/sh for AAVAS).
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