Au Small Finance Bank Ltd. share price target

AU SFB’s (AU) strong financial performance in Q3FY23 with AUM growth of 7% QoQ (20% FY23YTD), steady decline in GNPL ratio to 1.8%, PCR improving to 72%, flat QoQ NIM at 6.2% and ~90bps QoQ reduction in cost/income ratio reassure its ability to navigate the challenging period better than peers and emerge stronger.

We estimate revenue/EBITDA/PAT CAGR of 17%/23%/19% over FY22-25E based on the above thesis and we maintain our long term BUY rating with revised TP of Rs 3200/ share against the CMP of Rs 2,649/share. We value the company at 53x Dec-24 EPS. The TP implies an upside of 12% from the CMP.

Recognising the massive structural growth opportunity across segments, AU Small Finance Bank (AU) has reorganised itself into 10 strategic business units (SBUs) to ensure sustainability and scalability.

AU Small Finance Bank (AU SFB) has always remained ahead in pre-empting future business trends and building capabilities to serve the evolving needs of customers.

Steady decline in GNPL ratio to 1.9% (1.96% in Q1FY23), b) 30bps QoQ expansion in NIM with 10bps QoQ increase in incremental spread and ~275bps QoQ reduction in cost/income ratio (led by 11% QoQ NII growth).

We reiterate our BUY recommendation on AUSFB, valuing the stock at 4.1x FY24E ABV to arrive at a target price of Rs 750/share, implying an upside of 20% from the CMP.