Buy Ujjivan Financial Services; target of Rs 391: Geojit Research

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Geojit's research report on Ujjivan Financial Services

Higher NPA provisions & subdued business led to Rs-70cr loss in Q1FY18 on flat revenue growth.  GNPA and NNPA increased by 247bps and 227bps QoQ to 6.2% & 2.3% respectively in Q1FY18, post demonetisation dispensation.  Loan growth was tepid at 10% YoY as management remained conservative on disbursements due to repayment risks prevailing in select markets.  Factoring higher provisions and moderation in loan growth we downgrade our FY18E earnings by 80%.  Headwinds amid transition to SFB will impact earnings in the medium term, while a full fledged SFB adds long term growth visibility. We maintain our valuation of 2.5x FY19E Adj.BV and recommend Buy with a revised target price of Rs391.

Outlook

Headwinds during transition to SFB from demonetisation will impact earnings in the medium term, while long term growth visibility from a full fledged SFB is supporting the valuations. We retain our target valuation to 2.5x FY19E Adj.BV and recommend Buy with a revised target price of Rs391.

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