Sharekhan has given Buy recommendation for AU Small Finance Bank with a target price of Rs. 1260 in its research report issued on Feb 16, 2021

Sharekhan’s research report on AU Small Finance Bank

AU Small Finance Bank (AUSFB) had front-loaded provisions (on a proforma basis); and going forward, we expect a strengthened balance sheet and healthier asset-quality book (compared to pre-COVID levels), which make it well placed for growth in FY2022E and FY2023E. The bank expects credit cost to normalise from Q4FY2021; collection efficiency has improved across most segments; restructuring book is expected to be at ~1.5% of total by Q4FY2021 and is manageable. As a large part of the loan book is secured (98%) and collections are improving, we find the stock attractive as it has a long growth runway.

Outlook

AUSFB trades at 5.7x/4.6x its FY2022E/FY2023E ABPVS; We maintain Buy with a revised PT of Rs. 1,260.

 

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