Assets Under Management AUM

AU Small Finance Bank Action Target: Up 11% in 4 days, will the recovery of this troubled SFB stock continue?

NEW DELHI: AU Small Finance Bank shares are in recovery mode after plunging into a bearish grip earlier this year. While company management appears optimistic about the outlook for the housing and auto segments, which together account for 45% of lending, analysts believe the stock is still trading at a premium to its peers and takes most of the positives into account.

A median target of 23 analysts suggests an 11% upside for the stock.

Friday was the fourth day of consecutive gains for the stock, with the certificate hitting a high of 1,183.45 rupees, up 11% from the March 7 close at 1,064.90 rupees. At the prevailing price, the certificate is still down 17% from its 52-week high of Rs 1,420.65.

JM Financial said AU SFB is trading at higher valuations of 4.2x FY23 and 3.5x FY24 book value per share (BVPS), which adequately reflects the positives – a superior yield profile and a long growth track. The brokerage has a holding rating on the stock with a target of Rs 1,400, valued at 4.3 times FY24 BVPS.

Kotak said there was no change in its expectations for UA’s strong performance in growth and asset quality through the cycles. “However, valuations remain a constraint. Additionally, there are further near-term headwinds around crude oil/inflation and its potential impact on the vehicle portfolio and overall growth environment (focused on supply or demand).We have reduced the fair value to Rs 1,050 from Rs 1,100 and retain our SELL rating,” he said.

Giving updates on its wheels and home lending business, SFB said it was optimistic about strong growth prospects in both segments given low levels of penetration, growing geographic presence and untapped opportunities. in existing markets.

The push on digitalization remains high to accelerate growth, improve efficiency and risk management practices, management said.

The IIFL said AU SFB has a presence across the product line, but the market share in states other than Rajasthan is low, indicating a long growth streak.

“In the home lending segment, growth would be driven by deeper penetration into existing geographies (8 states) and expansion into other states where the bank already has a presence (7 states). together we remain positive on the bank’s growth momentum going forward.After the recent correction and the carryover of the target price to FY24, we update our recommendation on the stock to ADD based on 4x BVPS “, IIFL said while suggesting a target of Rs 1,320 on the stock.

The bank has a low average EMI of Rs 12,000 to 13,000 in the wheel segment, indicating ease of maintenance and helping to maintain asset quality, analysts said. Personal vehicles represent 44% of assets under management (AUM), followed by commercial cargo and commercial passengers at 26% and 17%, respectively.

Total assets under management for the segment stood at Rs 15,525 crore and represents 40% of total loans.

The SFB said it is focusing on affordable housing and the average term of these loans at origination is 18 years. “This adds duration to the overall portfolio and increases customer loyalty for the bank to sell its range of other products. Asset quality in this segment remains well controlled with a GNPA at 0.6%,” said the IIFL.

Total assets under management for this segment stood at Rs 2,099 crore and accounted for 5% of loans.

Motilal Oswal Securities expects AU SFB to generate an earnings CAGR of 35% in FY22-24 with an improvement in ROA to 2.1% and ROE to 20.4% during of the EX24. This brokerage has a ‘buy’ rating on the stock with a target of Rs 1,550.