Axis Securities Is Bullish On Ashish Dhawan Portfolio Stock For 15% Upside: Do You Own?

At the close of trading on Friday, Equitas Small Finance Bank, a mid-cap firm in the BFSI sector, had a market valuation of Rs 12,197.33 Cr. The bank's shares recently hit a new 52-week high of Rs 110.00 on December 14, 2023, and signified a gain of 80.23% YTD and 88.90% in a year for the company. The brokerage company Axis Securities, however, remains positive on the stock with a target price of Rs 125 and anticipates a possible upside of 15% despite the robust rally.

Investment Rationale

Axis Securities interacted with the team at Equitas Small Finance Bank (EQSFB) to understand the growth roadmap for the bank over the medium term as the bank looks to roll out new products to support growth and harbours ambitions to transition into a universal bank from a small finance bank. The brokerage has highlighted the below investment rationale to consider for the investors before buying the shares of Equitas SFB.

Q2FY24 Recap: Strong disbursement growth translated into healthy advances growth of 37/5% YoY/QoQ. Deposit growth was equally healthy at 42/11% YoY/QoQ, primarily led by TDs. Margin pressures continued with yet another sharp contraction of 33bps QoQ, with NIMs at 8.43%. Opex continued to remain elevated, reflecting the investment towards tech and new products. RoA/RoE stood at 2%/14.6% in Q2FY24. Asset quality improved QoQ with GNPA/NNPA at 2.1/0.9%.

H2FY24E Outlook: EQSFB will aim at maintaining its growth momentum with strong demand visible across segments. The bank has retained its guidance to deliver credit growth of 25-30% in FY24. Deposit growth continues to remain strong, led by TDs and EQSFB will look to exit FY24 with a deposit growth of 40-42% YoY. Focus continues to remain on protecting the CASA Ratio at 32-33% and the bank remains confident of doing so, given the initiatives it has undertaken. NIM pressure will continue with 15-20bps contraction in Q3FY24E before stabilising in Q4FY24E. The bank remains confident of delivering RoA of 2% in FY24, despite headwinds on margins and elevated Opex.

Equitas Small Finance Bank Share Price Target

"Robust growth, improving core fee income profile (with AD-1 license aiding fee income prospects), and steady credit costs should aid earnings traction for the bank as we expect earnings growth of ~28% CAGR over FY23-26E. We introduce FY26E estimates and roll forward to Sep'25E ABV, keeping our valuation multiple unchanged at 2.0x. The stock has run up in the last week (+14%), despite which we believe a diversified and secured loan book, long growth run-way and stable asset quality leave some room for further upside. We maintain our BUY recommendation on the stock with a revised target price of Rs 125, implying an upside of 15% from CMP," said Axis Securities in a note.

Equitas Small Finance Shareholding Pattern

During Q2FY24, the bank booked promoters' shareholding of 18.16%, DIIs stake of 43.93%, and public stake of 37.91%. As per the shareholding pattern of Equitas SFB for the July to September 2023 quarter, ace investor Ashish Dhawan held 4,03,70,000 shares or 3.60% stake in the bank.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.