Smallcap Stock To Buy Under Rs 100: Axis Securities Recommend Buy On This Small Finance Bank; Who?

Brokerage Axis Securities has recommended BUY on one small finance bank stock. This is Equitas Small Finance Bank which is currently near Rs 54 levels. The new target price set is Rs 69.

According to the analyst, EQSFB continues to grapple with asset quality pain flowing in from the MFI portfolio, thereby keeping credit costs elevated. In Q1, apart from the MFI portfolio, higher slippages were from the smaller ticket size SBL portfolio, owing to the adverse impact of the KA ordinance. The X-bucket CE in SBL, which had dropped to 96.2% in Feb'25, has seen an improvement to 98.4% in Jun'25 with focused collection efforts.

Further, the brokerage explained that the stress in the VF portfolio was due to seasonality generally seen in Q1, and the management is confident of maintaining healthy asset quality in the portfolio. Considering the elevated stress in the KA portfolio, EQSFB has further tightened credit norms for group loans, more conservative than MFIN guardrails 2.0. X-bucket collection efficiency (CE) in the MFI segment has improved marginally to 99.1% in Jul'25 vs 98.7% in Jun'25. The improvement has been visible across most geographies, with KA X-bucket CE improving to 97.4% in Jul'25 vs 96% in Jun'25, and TN reaching 99% in Jul'25. The X-bucket CE in the MFI book, sourced over the past 6 months is at 99.6%, and the book has been behaving well. The bank has strengthened its collections for OD customers.

They further said, "The MFI book, though only 9% of the portfolio, continues to weigh on earnings, with stress remaining elevated, especially in KA and TN. With the bank having front-loaded the stress and a decline in net slippages in Jul'25, which is expected to continue, credit costs would gradually trend downwards. The portfolio mix shift towards secured products, and resultantly lower share of higher-yielding MFI book, along with elevated interest reversals, is weighing on the NIMs. However, as the benefit of a largely fixed rate book, deposit rate actions are gradually flowing in along with a calibrated growth resumption in the MFI book, NIMs are expected to improve over FY27-28E. We believe (1) Improving NIM profile, (2) Declining Opex ratios, and (3) Meaningfully lower credit costs should drive RoA recovery to 1.2-1.5% over FY27-28E vs negligible RoA in FY26."

Accordingly, the brokerage has recommended BUY for a reasonable valuation of Rs 69.