Monday, October 7, 2024

Equitas Small Finance Bank – Factoring In Near-Term Pain: Motilal Oswal

by rajtamil
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NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Motilal Oswal Report

Equitas Small Finance Bank Ltd. has demonstrated robust growth with a 26% compound annual growth rate in its loan book and a 38% CAGR in deposits from FY22-FY24, significantly improving its credit-deposit ratio from 102% to 86% and increasing the retail deposit mix to 69%.

Despite current challenges in the MFI sector, where its contribution has decreased to ~17%, the bank's ability to rebound from credit cycles with controlled credit cost suggests potential asset quality improvement from H2 FY25.

The stock has corrected 29% from its January 2024 peak. However, with sustained growth expected, a projected improvement in return on asset to 1.7% by FY26, and a current valuation of 1.2 times FY26 book value, Equitas SFB remains an attractive long-term investment.

We reiterate a Buy rating with a revised target price of Rs 100 (based on 1.6 times FY26E adjusted book value).

Click on the attachment to read the full report:

Deepak Nitrite – Optimistic About Future Opportunities: Motilal Oswal

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