Axis Direct one of the biggest brokerage firms in India has a buy call on Equitas small finance bank, for a 40% return in 1 year. Equitas small finance bank has given a return of 30% in the last 1 year. The bank has been maintaining a healthy ROA of 1.53% for the last 3 years, the company has been consistently maintaining a NIM of 7.71% for the last 3 years and Equitas small finance bank has delivered a good profit growth of 129.39% over the past 3 years.
|Current Market Price (CMP)||Rs 56|
|Target Price||Rs 77|
|1 Year Return||40%|
Equitas Small Finance Bank Ltd. (EQSFB) results were above our expectations on account of improved NII/NIMs and lower-than-expected provisions. On the operational front, disbursements stood at Rs 2,861 Cr (+16% YoY, -9% QoQ), as Oct-Nov21 remained muted due to focus shifting on improving collections.
Growth trend resumed in Dec’21 with disbursements of Rs 1,200 Cr. The management has indicated that while the demand remains robust, the holidays during the festive season dampened disbursements in Jan’21 and are likely to range between Rs 825-900 Cr and improve thereafter.
Muted disbursement growth translated into AUM growth of 13% YoY. With the business activity picking up, on-ground situation improving, and growth visibility emerging, the management expects growth to pick up FY23E onwards. The traction on the CASA deposits remained strong which grew by 129% YoY, aiding deposits growth which stood at 13% YoY. CASA ratio improved to 50.8% and the management expects to maintain it in a similar territory. Headline asset quality improved by 25bps QoQ aided by write-offs of Rs 102 Cr. Slippages moderated Q0Q, though continued to remain elevated (slippage ratio of 5.4%).
Key Result Highlights: Report by Axis Direct
NII stood at Rs 541 Cr (+12% YoY, +12% QoQ) vs. our expectation of Rs 513 Cr. NIMsinched up to 9.1% from 8.5% in Q3FY21 and 8.1% in Q2FY22 due to lower CoF and lower interest reversals.
Opex grew by 27% YoY. The C-I Ratio remained elevated at 66.7% vs 55.6% in Q3FY21 and improved QoQ to 68.7% in Q2FY22. PPOP was at Rs 225 Cr (-21% YoY, +13% QoQ) vs our expectation of Rs 213 Cr. The bank will continue to invest in building the franchise and towards technological advancements keeping the near-term Opex growth elevated.
Provisions were reported higher at Rs 78 Cr vs our estimate of Rs 110 Cr. Lower provisions aided the bottom line as PAT came in at Rs 108 Cr (-2% YoY, +162% QoQ) vs our estimate of Rs 77 Cr.
The above stock was picked from the brokerage report of Axis Direct, investing in equity poses a financial risk, before investing please consult your financial advisor, we are not liable for any losses caused as a result of decisions based on the article.