AU Small Finance Bank Falls Even As Analysts Bet On Growth Outlook After Q4
Here's what brokerages have to say about the company's March-quarter results and growth prospects.
Shares of AU Small Finance Bank Ltd. logged the worst day in this week even as analysts raised earnings estimates for the lender after increased disbursements aided growth in assets under management and collection efficiencies improved asset quality in the fourth quarter.
The lender's disbursements stood at Rs 10,295 crore, the highest ever quarterly achievement, in the three months to March 31, according to its exchange filing. That's a growth of 26% sequentially and 44% year-on-year. Its AUM grew 27% over the year ago and 14% sequentially to Rs 47,831 crore in the reported period.
AU Small Finance Bank Q4 FY22 (Consolidated, YoY)
Net interest income up 43% at Rs 936.56 crore.
Net profit jumped 105% to Rs 346.07 crore.
Gross NPAs at 1.98% against 2.60% in Q3 FY22
Net NPAs at 0.50% compared with 1.30% in Q3 FY22.
Recommended bonus issue in 1:1 ratio.
Recommended dividend of Re 1 apiece on pre-bonus share capital.
Increased authorised capital to Rs 350 crore to Rs 1,200 crore.
Shares of AU Small Finance Bank fell over 5% intraday and closed with 3.72% losses on Wednesday. Trading volume on the stock is nearly twice the 30-day average. Of the 27 analysts tracking the lender, 17 maintain a 'buy', six suggest a 'hold' and four recommend a 'sell', according to Bloomberg data. The average of the 12-month target price implies an upside of 6.6%.
Here's what brokerages have to say about the company's March quarter results and growth prospects.
Motilal Oswal
Maintains 'buy' and raises target price to Rs 1,625 from Rs 1,550 apiece, an implied upside of 15.2%.
Provision coverage ratio takes a giant leap as the lender reports a stellar performance in the quarter ended March.
43% YoY NII growth, stable margin and double-digit sequential business growth led to the earnings beat.
Robust collection efficiencies aided asset quality.
Raises FY23E/24E PAT estimates by 6-10% and expects AU Small Finance Bank to deliver 37% earnings CAGR over FY22-24.
Expects RoA/RoE of 2.1%/21%, respectively, in FY24.
Retail deposit mix continues to improve, while AUM growth remains strong with healthy momentum in disbursements.
Nirmal Bang
Reiterates 'buy' with a target price of Rs 1,625, an implied upside of 15.2%.
Strong growth in disbursements drove AUM and NII growth.
High opex was offset by income tax refunds, resulting in in-line PAT.
Expects growth to remain robust from housing loans, wholesale banking segments across geographies.
Uttar Pradesh remains the key state for growth over the next few years.
Remains positive on the growth outlook and forecasts AUM, NII and PAT CAGR of 27%, 23% and 24% over FY22-24E.
Emkay Global
Maintains 'hold', hikes target price to Rs 1,340 from Rs 1,275, still an implied downside of 5.3%.
Better NII growth, higher fees and lower taxes offset higher opex and led to PAT beat.
Lender has raised its specific PCR to a comfortable level of 75% from 51%.
All-time high disbursements across loan products led to strong AUM growth.
The small finance bank will face some margin headwinds in a rising rate scenario due to its largely fixed-rate asset book.
The company's decision to increase number of independent directors to eight to allay concerns around corporate governance and exits in audit/risk management team is a positive.
Upgrades FY23-24 estimates by 5% on better growth trajectory.
The lender should strengthen its risk/compliance architecture before the planned transition though it is eligible to apply for universal bank status.