Motilal Oswal's research report on AU Small Finance Bank
AUBANK reported 30% YoY growth in net earnings (8% beat), driven by lower provisions. However, operating profit came in line with growth in NII, aided by stable margins and healthy loan growth. Gross advances/deposits grew strongly at 38% YoY each, however, CASA deposits witnessed pressure, resulting in CASA ratio moderating to 38%. The absolute amount of GNPA increased 2% QoQ. However, headline GNPA/NNPA ratio improved 9bp/5bp QoQ to 1.81%/0.51%, respectively. PCR ratio improved to 72.1%. We slightly raise our estimate, factoring in for higher loan growth and estimate AUBANK to deliver 25% earnings CAGR over FY22–25 with a RoA/RoE at 1.8%/16.1%, respectively, in FY25E. We reiterate our Buy rating on the stock.
Outlook
We slightly raise our estimates to factor in for higher loan growth and estimate AUBANK to deliver 25% earnings CAGR over FY22–25 with an RoA/RoE of 1.8%/16.1%, respectively, in FY25E. We reiterate our Buy rating with a TP of INR740 (3.6x Sep’24E BV).
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