ICICI Securities has given Buy recommendation for AU Small Finance Bank recommended buy rating on the stock with a target price of Rs 1370 in its resear with a target price of Rs. 1370 in its research report issued on Mar 16, 2022

ICICI Securities research report on AU Small Finance Bank

AU Small Finance Bank (AU) has always remained ahead in pre-empting future business trends and building capabilities to serve the evolving needs of customers. We derive this view from AU’s past initiatives such as: i) reducing exposure to MHCV segment during FY13-FY14; ii) strategic shift towards used vehicle financing in FY19-FY20 considering slowdown in new vehicle sales; iii) during 9MFY22, it calibrated growth in wheels segment as reflected in higher sourcing in customers with >700 CIBIL score at 56% vs 45% on AUM basis; and iv) focus on building a digital platform during FY20-FY21 given the current wave of digitisation. Recognising the massive structural growth opportunity across segments, AU has reorganised itself into 10 strategic business units (SBUs) to ensure sustainability and scalability. With this backdrop, AU hosted a second event to discuss key strategic priorities for two of the SBUs: i) wheels and ii) housing loans.


We believe the SBU structure will help AU have a differentiated approach in each of its businesses and customer journeys, and carve a niche for itself. Considering an adequate provision buffer of 2.8% of loans against stress pool of 5.7% (GNPL at 2.6% + standard restructured loans at 3.1%), focus on tapping upcoming growth opportunities (9MFY22 AUM growth at 11%) and healthy profitability (9MFY22 RoE at 16%), we upgrade the stock to BUY (earlier: Hold) with an unchanged target price of Rs1,370. It is currently trading at 4.2x / 3.6x FY23E / FY24E P/BV, respectively, and we value it at 4.2x FY24E BVPS.

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At 12:41 hrs AU Small Finance Bank was quoting at Rs 1,182.05, up Rs 2.75, or 0.23 percent.

It has touched an intraday high of Rs 1,203.85 and an intraday low of Rs 1,169.75.

It was trading with volumes of 22,441 shares, compared to its thirty day average of 44,276 shares, a decrease of -49.32 percent.

In the previous trading session, the share closed up 0.81 percent or Rs 9.50 at Rs 1,179.30.

The share touched its 52-week high Rs 1,420.65 and 52-week low Rs 910.00 on 03 February, 2022 and 05 May, 2021, respectively.

Currently, it is trading 16.8 percent below its 52-week high and 29.9 percent above its 52-week low.

Market capitalisation stands at Rs 37,100.83 crore.

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