Equitas Small Finance Bank Ltd. share price target

Equitas sustained its industry-leading profitability within the SFB space – evident in its RoA at ~2% in Q2FY24 driven by contained credit cost at 83bps. While NIM receded 33bps QoQ to 8.4%, management highlighted that this is transitory in nature and expects NIM expansion in H2FY24. Asset yields have already started reflecting in lending rate hikes that Equitas implemented over the past one year – as it expanded 28bps QoQ.

We recommend a BUY rating on the stock with a TP of Rs 97, implying an upside of 10% from CMP.

We maintain our BUY recommendation on the stock.

Equitas Small Finance Bank (Equitas) has sustained >2% RoA for the 3rd consecutive quarter despite >30bps QoQ NIM compression and >5% QoQ increase in cost-income ratio to 66% in Q1FY24. Earnings were primarily boosted by lower credit cost, which settled at ~80bps in Q1FY24 vs 190bps in Q4FY23, reflecting robust credit environment.

Q4FY23 was the second consecutive quarter in which Equitas SFB (Equitas) sustained RoA of >2% despite additional provision of Rs0.9bn towards improving coverage on existing NPLs. As a result, NNPL fell to 1.2% as of March’23.

We maintain our BUY recommendation on the stock.