Buy Equitas Holdings; target of Rs 150: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Equitas Holdings

EQUITAS reported a 6% YoY growth in PAT to INR1.2b in 4QFY22, led by higher NII growth and flat employee expenses, resulting in an overall improvement of 14% YoY in PPOP. However, elevated provisioning of INR1.2b (+27% YoY) restricted PAT growth. Business growth picked up, with a 5% QoQ and a 15% YoY jump in AUM to INR206b, led by robust tractions across most segments. Housing Finance posted a strong 25% QoQ growth. The management remains upbeat on growth in advances and has guided at a 30-35% growth in FY23. The momentum in deposits sustained, with a 6% sequential growth. On the asset quality front, slippages were elevated, although a healthy recovery and upgrades, along with higher write-offs, resulted in a decline of 37bp/4bp QoQ in GNPA/NNPA ratio to 4.2%/2.5%. Restructuring book stands elevated at INR15b (~7.7% of loans). However, most of the stress assets within this book have already slipped into NPA. Collection efficiency is back to pre-COVID levels and lends comfort on recovery trends. We increase our FY23/FY24 PAT estimate by 9.4%/5.5% and estimate a RoA/RoE of 1.8%/13.9% for FY24. We maintain our Buy rating.

Outlook

However, most of the stress has already slipped into NPA. Progress on amalgamation remains a key overhang. We estimate a FY24 RoA/RoE of 1.8%/13.9%. We maintain our Buy rating with an unchanged TP of INR150/share (1.1x FY24E ABV).

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