Equitas Small Finance Bank jump over 7% post Q4 results. Should you Buy, sell or hold?

Shares of Small Finance Bank jumped 7.5% to Rs 78.35 in Monday's trade on BSE after the bank reported a 58% on-year rise in net profit for the March quarter at Rs 190 crore, backed by business expansion and betterment of asset quality.

Total income during the quarter under review stood at Rs 1,394.41 crore as against Rs 1,043.97 crore registered in the same period of last year. The Board of Directors recommended a dividend of Re 1 per equity share.

At 12.07 pm, the stock was trading 3.8% higher at Rs 75.6 on BSE. On a year-to-date basis, the stock has surged 26%, while it has risen over 46% in the last six months.


Should you buy, sell or hold Equitas SFB's stock? Here's what analysts say:

Motilal Oswal
Motilal Oswal maintained its Buy rating on Equitas Small Finance Bank with a target price of Rs 87.

"Equitas SFB reported a strong quarter with healthy AUM growth across segments. Higher NII and other income boosted earnings, which were utilized to increase the PCR. Margin expanded by 9bp QoQ to 9.1%. Deposits growth was supported by healthy traction in term deposits while the CASA ratio declined. On the asset quality front, collection efficiency remained healthy, along with lower slippages, leading to improvement in asset quality," it said.

Emkay
Emkay retained its buy rating on Equitas Small Finance Bank with a target price of Rs 90.

"Post Founder cum MD & CEO’s (Mr Vasudevan) decision to stay back in the bank, the stock had seen a decent run-up. Also, the bank has completed the reverse merger of its holdco – a long-term overhang – and would now apply for a Universal Banking licence, which we believe will be positive for the bank and thus should be an additional catalyst apart from a steady improvement in return ratios," it said.

Axis Securities
Axis Securities reiterated its Buy rating on Equitas SFB with a target price of Rs 88.

We expect EQSFB to continue delivering encouraging credit/deposit growth of 28/30% CAGR over the medium term. Robust growth, healthy margins, improving fee income profile (with AD1 license aiding fee income prospects), and moderating credit costs should aid earnings traction for the bank as we expect earnings growth of 21% CAGR over FY24-25E.

Improving cost ratios remain a key factor in pushing RoA expansion beyond 2%. We tweak our NII estimates by 5-6% over FY24-25E to reflect the gradual drop in margins, while we keep our earnings estimates largely unchanged.

YES Securities
YES Securities reiterated its Buy rating on Equitas SFB with a target price of Rs 90.

"We estimate 25% loan CAGR and 33% earnings CAGR over FY23-25 and expect RoE to surpass 16% in FY25. Equitas SFB’s healthy RoE’s should be looked in the context of a well-diversified loan book, credible deposit franchise and capital comfort. With uncertainties related to merger, management transition, asset quality and growth behind, bank’s valuation should re-rate from current undemanding level of 1.3x P/ABV and 8x P/E on FY25 basis," it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)