Buy Equitas Holding; target of Rs 168: Axis Direct

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26 Aug, 2025 12:21

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Q2FY18 was weak marked by sluggish growth in loan book (~14% YoY) and further deterioration in asset quality (GNPAs up 85 bps QoQ at 5.76%). Consequently, PAT was 76 YoY lower than estimate (Rs 109 mn). The bank has diluted its provisioning policy; if not, it would have reported no profit/loss in Q2.

Disbursements to moderate in MFI, but will be well compensated by newer product lines (gold, agri, business loans). With most of the transition expenses behind, we expect some signs of improvement in ensuing quarters. We cut earnings for FY18E and FY19E by 60% and 36% to factor in weak H1FY18 and higher provisioning in MFI book. We value Equitas at 2.5x FY19E P/ABV to arrive at revised TP of Rs 168 (16% upside from CMP). At CMP, Equitas trades at 2.2x FY19E P/ABV of Rs 67.

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