Buy This Small Finance Bank Stock, Shares Can Jump 44% From Current Level, Says ICICI Securities

Leading brokerage firm, ICICI Securities has given a "buy" call to Equitas Small Finance Bank with an estimated target price of Rs Rs 70 per share. Considering the given target price, the stock is likely to jump, giving a positive return of 44%. It is a small cap private sector - Small Finance bank with a market cap of Rs 6,115.75 crore.

Equitas Small Finance Bank is one of the leading Small Finance banks in India with significant branches and reaches to customers. The Bank offers savings accounts, fixed deposits (FD), investments, debit and credit cards, loans, Digital Banking, insurance, online services, and other banking related activities.

Stock Outlook & Returns

The shares of Equitas Small Finance Bank at the time of writing is trading at Rs 48.85 per share on NSE, down 1.41% from its previous close of Rs 49.55 per share. The stock recorded its 52 week high on 25 November 2021 at Rs 68.20 and 52 week low on 17 June 2022 at Rs 37.45, respectively
The stock was listed on the Stock exchange 2 years back on 2 November 2020. Since its listing, it has delivered 49.39% returns on investments. In the past 1 week, it has gained 0.93%, whereas, in 1 month fallen 0.41%. In the past 3 months, it grew 9.42%, giving a positive return. In the past 1 year, the stock has given 22.91% negative return on investments. 

Credit cost normalised; AUM growth to remain robust at 25% in FY23E

Equitas SFB's (Equitas) Q2FY23 financial performance was mixed with steady topline growth (average 5% QoQ NII growth in past 6 quarters), sustained momentum in AUM growth (disbursements were up 19% QoQ) and stable NIM despite high share of fixed-rate loans (>70% of total loans). Disbursements in Q2FY23 stood at Rs38.5bn driven by 46% QoQ growth in housing loans and >20% QoQ growth in vehicle finance. However, higher operating expenses (up 15% QoQ) and one-time provision on covid-restructured pool impacted the bottom line. Credit cost remained at 1.6% (1.35% adjusted for the one-time impact) in Q2FY23. Notably, Equitas' liability profile continued to strengthen as seen in the CASA ratio sustaining at 48% and retail TD share at 68%. Elite (saving product for HNI customers) SA book now stands at Rs100bn, representing ~46% of total deposits. "We believe Elite customer base (~75k) offers significant scope for crosssell and upsell going forward," the brokerage has said. 

Buy for a target price of Rs 70/share

Asset quality continued to improve with GNPL falling to 3.9% vs 4.1% in Q1FY23 and NNPL to 2% vs 2.15% in Q1FY23 with PCR improving to 50.5% vs 48.5% in Q1FY23. While gross fresh slippages appear elevated at Rs3.1bn (~6% slippage ratio) due to migration to daily NPL tagging, net slippages stood at

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.