Sharekhan has given Buy recommendation for AU Small Finance Bank with a target price of Rs. 800 in its research report issued on Oct 19, 2022
Sharekhan’s research report on AU Small Finance Bank
AU Small Finance Bank (AUSFB) reported strong all-round performance in Q2FY2023 with PAT at Rs. 343 crore (up 23% y-oy/28% q-o-q), which was above consensus expectations and our estimates (+11%) aided by strong NII growth, higher core fee income, and lower credit cost. NII grew by 44% y-o-y/11% q-o-q, led by strong advances growth of 44.4% y-o-y/6.3% q-o-q and margin improvement. NIM improved by 30 bps q-o-q to 6.2%. Core fee Income grew robustly by 32% y-o-y/14% q-o-q, driven by healthy growth in disbursements and increasing share of transactional customers on the liability side. Despite higher opex growth (up 51% y-o-y/12% q-o-q), PPOP grew at a healthy pace up 27% y-o-y/27% q-o-q, driven by strong NI growth and higher core fee income (2.0% of average advances vs. 1.8% in Q1FY2023). Asset quality remained stable. The stock is currently trading at 4.8x and 4.1x its FY2023E and FY2024E ABV, respectively.