4 brokerages recommend a “buy” on this small financial banking stock

Axis Capital: Maintain BUY with revised target price of Rs 60

Equitas SFB has all the ingredients to continue its growth over a long period. “The aim is to grow the asset base outside Tamil Nadu (hometown) which will deliver results over time. As his digital increase in liabilities continues, he is running pilot projects from asset side to reduce TAT Reduced cost of credit forecast (1.5% vs. 2% earlier) reassuring We are still conservative and factor in 2% for FY23 Pay attention to the transition Hold long with a target price of Rs 60 (1.6x FY24E P/ABV),” the brokerage said.

According to Axis Capital, credit costs were 170 basis points (annualized) compared to 280 basis points in Q1. Slippages at Rs 3.1 billion down 7% QoQ (on a similar basis due to policy change), GNPA/NNPA (3.91%/1.97% in Q2FY23) were a bit below the T1. Restructured loans down to 9.76% (4.33% in Q2).

Yes titles, said

Yes Securities, Says “buy” with a price target of Rs 63

Yes Securities has a buy Equitas Small Finance Bank shares with a price target of Rs 63.

The main things to watch over the next few quarters would be 1) any acceleration in growth, 2) mobilization and retail pricing trends / HNI CASA and TD, 3) the results of the bank’s focus on the deepening of recently acquired relationships of responsibility, 4) the trajectory of NIM and 5) managerial transition. The calibration of the NIM and the cost/revenue forecasts led to slight reductions in the profit estimates. “We are, however, keeping BUY on a favorable risk-reward ratio with a valuation at 1.2x FY24 P/ABV,” Yes Securities said.

IIFL titles

IIFL titles

IIFL Securities maintained a buy call on Equitas Small Finance Bank shares with a price target of Rs 64 as valuations are favourable. “The overall outlook remains strong, with management reiterating its cost of credit forecast of 1.5% for FY23 due to the normalization of asset quality and despite the reduction in its loan growth forecast to 25% for FY23. Lower growth and higher operating expenses, however, would mean the 2% ROA achievement would be pushed into FY24. Given the expected return profile, the valuation at 1.1x fiscal 24 and book value per share looks favorable,” IIFL Securities said.

JM Financials, says Buy Equitas Small Finance Bank with target of Rs 65

JM Financials, says Buy Equitas Small Finance Bank with target of Rs 65

According to JM Financials, in 2Q23, GNPL/NNPL improved to 3.9%/2.0% (-19 bps/-18 bps QoQ) and PCR increased to 50.5% (+200 bps QoQ) ), which is in line with management’s objective to achieve a PCR of 60% in the long term through strengthened provisioning standards. Total restructured loans amounted to INR 9.9 billion (4.3% of loans versus 5.8% in 1Q23), of which INR 2.5 billion (26% of the restructured portfolio) is currently NPA. Slippages in the restructured portfolio amounted to INR 1 billion, resulting in high slippages of INR 3.1 billion for the quarter (6.5% (annualised)). Management has stressed that it expects further strain to be limited, which should help moderate credit costs.

“We expect credit costs to moderate to 1.9%/1.5% by FY23E/FY24E. We recognize that margins may moderate from current levels in the near term, however, accelerating loan growth, moderating credit costs and operating leverage should help Equitas deliver a RoA of 1. 7%/2.0% in FY23E/FY24E. Maintain long with a target price of Rs 65, valuing Equitas at 1.7x FY24E adj. BVPS.