Reduce Au Small Finance Bank, target price Rs 1319: HDFC Securities

HDFC Securities has reduce call on Au Small Finance Bank with a target price of Rs 1319. The current market price of Au Small Finance Bank Ltd. is Rs 1354.75. Time period given by analyst is one year when Au Small Finance Bank price can reach defined target.


Au Small Finance Bank Ltd., incorporated in the year 1996, is a banking company (having a market cap of Rs 43177.52 Crore).


Au Small Finance Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest and Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2021.


Financials
For the quarter ended 31-03-2022, the company reported a Standalone Total Income of Rs 1978.41 Crore, up 11.64 % from last quarter Total Income of Rs 1772.09 Crore and up 26.09 % from last year same quarter Total Income of Rs 1569.01 Crore. The bank reported net profit after tax of Rs 346.07 Crore in latest quarter.

Investment Rationale
AUBANK’s core earnings were a tad ahead of estimates, led by stronger asset yields and higher fees, offset by elevated operating expenses. Asset quality clocked a positive surprise on the back of a sharp 62bps QoQ cut in GNPA at 1.98%, albeit on the back of a steep 38% haircut on delinquencies from its secured portfolio. Business momentum was strong with the highest-ever disbursement growth (+39% YoY, +26% QoQ). AUBANK continued to step up investments in its franchise-building blocks and new asset classes, which are likely to drag medium-term profitability metrics (opex to assets at ~4%). It adjusts FY23E/FY24E estimates upwards by 5%/4% to factor in lower credit costs, offset by higher opex. Given punchy valuations, the brokerage maintains REDUCE with a revised TP of INR1,319 (4.1x Mar’24 ABVPS).

Promoter/FII Holdings
Promoters held 28.23 per cent stake in the company as of 31-Mar-2022, while FIIs owned 34.31 per cent, DIIs 18.77 per cent.