Buy Ujjivan Small Finance Bank; target of Rs 45: Emkay Global Financial

Emkay Global Financial is bullish on Ujjivan Small Finance Bank has recommended buy rating on the stock with a target price of Rs 45 in its research report dated October 25, 2024.

Broker Research

October 25, 2024 / 14:20 IST

Buy

26 Aug, 2025 12:21

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Emkay Global Financial's research report on Ujjivan Small Finance Bank

Ujjivan SFB reported 24% PAT miss at Rs2.3bn, mainly due to lower other income and higher provisions, as stress in MFI accelerates. Bank’s AUM growth moderated to 14% YoY/1% QoQ (net credit growth at 20% YoY), as it continued with its cautious growth strategy in MFI as initiated in 1Q. However, the bank remains focused on accelerating secured loan growth with its share now at 35% from 31% in Q1; it hopes to achieve 40% by Mar-25. This should weigh on margins, while LLP should remain elevated with hopes of some asset quality normalization by 4Q. However, the bank aspires for steady RoE at 18- 20% on the back of better risk-adjusted margins, better operating leverage, and contained LLP as it transitions toward higher share of secured loans. Factoring in lower NIM/higher LLP, we cut earnings for FY25E/26E/27E by 24%/14%/8%. We also cut our TP further to Rs45 from Rs55, valuing the bank now at 1.1x Sep-26E ABV. However, we retain BUY given relatively superior RoAs among peers and the potential transition to being a Universal Bank.

Outlook

Factoring in lower NIM/higher LLP, we cut earnings for FY25E/26E/27E by 24%/14%/8%. We also cut our TP further to Rs45 from Rs55, valuing the bank at 1.1x Sep-26E ABV. However, we retain BUY given relatively superior RoAs among peers and potential transition towards a Universal Bank.

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