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Stock To Buy: This SFB Approves Rs. 3,000 Cr Capital Raising Plan, Pat Grew 32% YoY: Motilal Oswal
Top brokerage firm Motilal Oswal suggests investors buying the stocks of AU Small Finance Bank (SFB). AU Small Finance Bank's board reportedly approved an Rs. 3,000 crore capital raising plan, recently, which can be a key point to surge its share price. Additionally, the bank has reported a 32% YoY growth in PAT at Rs. 2.7b, and NII grew 35% YoY to Rs. 9.8b, supported by a 43% YoY growth in advances.
Stock To Buy: Target Price, Current Market Price
The Current Market Price (CMP) of AU Small Finance Bank is Rs. 577. Motilal Oswal has estimated a Target Price for the stock at Rs. 680. This stock has the potential to give an 18% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 36,976 crore.
| Stock Outlook | |
|---|---|
| Current Market Price (CMP) | Rs. 577 |
| Target Price | Rs. 680 |
| Potential 1 year return | 18.00% |
| 52 week high share price | Rs. 732.98 |
| 52 week low share price | Rs. 462.50 |
The bank's core fee income grew 210% YoY, but fell 16% QoQ. OPEX increased by 62% YoY as the bank continues to invest in building the franchise. Total AUM grew 37% YoY and 5% QoQ to Rs. 502b, led by healthy disbursements across most segments. Total deposits grew 48% YoY to ~Rs. 546b, with SA growing 135% to Rs. 190b.
The CASA ratio stood at 39% v/s 37% in 4QFY22. Absolute GNPAs increased by 5% QoQ. NNPA ratio increased by 6bp QoQ to 0.56%. PCR ratio decreased by ~340bp to 71.7%.
Why Should You Buy AU SFB: Motilal Oswal
"AU Bank reported a moderate performance in 1QFY23, with a contraction in margin and a marginal increase in the NNPA ratio. While lower provisions supported earnings, PCR contracted by ~340bp QoQ to 72%. On the business front, growth in advances was strong at 43% YoY. However, the sequential trend was soft compared to the past few quarters. Traction in deposits remains healthy, especially savings account deposits. The bank carries contingent reserves of Rs. 1.44b (29bp of loans), which, coupled with 16% coverage on restructured assets, provides comfort. We cut our FY23/FY24 PAT estimate by ~3%/11% as we build in a lower margin of 5.9% (from 6% earlier) and higher OPEX, due to sustained investments in building the franchise. We estimate AU BANK to deliver 26% earnings CAGR over FY22-24 and RoA/RoE at 1.8%/18.3% in FY24," says Motilal Oswal in a recent brokerage report.
Company profile:
AU Bank is listed in Fortune India 500 Company. For more than 25 years, the institution has helped over 2 million customers achieve their business objectives, the bank says. In the recent quarterly report, it mentioned that its C/I ratio has elevated to 65%. In the long run, the bank endeavors to pare it down to 50%. PPOP declined by 18% YoY to Rs. 3.9b due to a weak treasury performance. Additionally, its headline asset quality ratio improved marginally by 2bp to 1.96% due to robust growth in advances.
Disclaimer
The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
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