Buy Ujjivan Small Finance Bank; target of Rs 62: Geojit

Geojit's research report on Ujjivan Small Finance Bank

Ujjivan Small Finance Bank Ltd., a wholly owned subsidiary of Ujjivan Financial Services Ltd. (USFL), serves over 76 lakh customers through 661 branches. USFL is the 3rd largest SFB with a loan book size of Rs.25,326cr and a deposit base of Rs.26,660cr. Advance growth is expected to remain strong at 25%, led by both microfinance and non-MF book with strong customer addition and brand building strategies. Considering strong loan growth, an improving cost to income ratio and lower credit costs, USFL is expected to record an ROE of 25% in FY24 and 23% in FY25, well above the management guidance. The proposed reverse merger with the parent company is expected to be completed within 2024. Asset quality continues to witness improvement, with GNPA/NNPA declining to 2.40%%/0.06%, respectively.

Outlook

Considering the strong business performance, we upgrade our rating to BUY based on 1.8x FY25E Adj.BVPS with a target price of Rs. 62.