Hold AU Small Finance Bank; target of Rs 700: Emkay Global Financial

Emkay Global Financial recommended hold rating on AU Small Finance Bank with a target price of Rs 700 in its research report dated April 26, 2023.

Broker Research

April 26, 2023 / 16:37 IST

hold

26 Aug, 2025 12:21

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

AU SFB reported a PAT beat at Rs4.2bn (vs estimate of Rs3.9bn), up 23% YoY, mainly due to higher ‘other income’ and lower tax rate (@20%), and partly offset by higher opex. Gross slippages were lower at Rs1.9bn/1.4% of loans, leading to steady moderation in GNPA ratio by 15bps QoQ to 1.7%. Credit growth was relatively moderate at 26% YoY/5% QoQ, with heavy lifting being done by the corporate/SME book, while the retail book was down 1.9% QoQ due to securitization in the VF portfolio (gaining cost benefit at attractive pricing) to balance margin with growth. Recently, the RBI approved MD & CEO Sanjay Agarwal’s and WTD Uttam Tibrewal’s reappointment for the next 3 years (till 2026), thereby removing a major overhang, particularly post the spate of resignations in risk/compliance last year that raised concerns. Bank awaits guidelines from the RBI to apply for the Universal Banking licence.

Outlook

We expect the bank to deliver 1.8% RoA/15-17% RoE over FY24-26E, led by healthy growth, margins and steady moderation in cost-income ratios. We retain our HOLD on the stock, with revised TP of Rs700/share, valuing the standalone bank at 3.2x FY25E ABV vs 3.4x Dec-24E ABV earlier.

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