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 January 24, 2025.

Broker Research

January 24, 2025 / 12:37 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

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

Ujjivan SFB logged a 30% miss on PAT at Rs1.1bn, mainly due to sharp contraction in margin and higher provisions as NPAs surged in the MFI portfolio driven by imposition of MFIN guardrails. Slippages were higher at Rs3.5bn / 4.7% of loans, largely on stress in Ujjivan+3 customers. Nevertheless, the bank managed to keep GNPA ratio at 2.7% (less than 3% threshold for SFB license) due to higher write-offs and NPA sale. The PAR 30+ MFI portfolio is still high at 5.6%, and thus the bank expects slippages to stay elevated in Q4FY25, before it sees some relief from Q1FY26 onward. The Ujjivan+3 lender-wise borrower portfolio stands at 8%, which is lower than that of some NBFC-MFIs and we thus believe Ujjivan will recover early.

Outlook

Factoring in the slower growth, lower margins, and higher LLP, we cut our earnings by 14-18%. But we retain BUY, with TP of Rs45, rolling forward on 1.1x Dec-26E ABV, given relatively healthy RoA among peers (vs Equitas) and its potential transition into a Universal Bank.

For all recommendations report, click here