Buy Equitas Small Finance Bank, target price Rs 51: JM Financial

JM Financial has buy call on Equitas Small Finance Bank with a target price of Rs 51. The current market price of Equitas Small Finance Bank is Rs 39.5 .

Equitas Small Finance Bank Ltd., incorporated in the year 1993, is a banking company (having a market cap of Rs 4450.56 Crore).

Financials
The Bank reported a Gross Non Performing Assets (Gross NPAs) of Rs 399.65 Crore (.00 % of total assets) and Net Non Performing Assets (Net NPAs) of Rs 198.92 Crore (.00% of total assets). For the quarter ended 30-09-2020, the company has reported a Standalone Interest Income of Rs 730.00 Crore, up 10.34 % from last quarter Interest Income of Rs 661.61 Crore and up 25.68 % from last year same quarter Interest Income of Rs 580.83 Crore. The bank reported net profit after tax of Rs 102.99 Crore in latest quarter.

Investment Rationale
The brokerage sees Equitas achieving steady-state ROAs of 2% by FY23E with greater loan book diversification and a better liabilities franchise. It finds current valuations of 1.0x Sep’22E P/B undemanding given the granular asset mix, longer growth runway and improving asset balance. Initiate coverage with a BUY rating and target price of INR 51, valuing Equitas at 1.4x Sep’22E.


Promoter/FII Holdings
Promoters held 28.67 per cent stake in the company as of March 31, 2020, while FIIs held 31.46 per cent, DIIs 3 per cent and public and others 36.88 per cent.