Target: ₹115

CMP: ₹91.82

Equitas Small Finance Bank continues its impressive streak by achieving 2 per cent Reported RoA for the third consecutive quarter. This performance has also translated into a significant improvement in Reported RoE, which now stands at an impressive 14.54 per cent, showing a remarkable increase of 550 basis points YoY.

However, on opex front there was sharp increase which led to CTI at 65.1 per cent (440/700bps YoY/QoQ). On the front of asset quality, EQSFB has demonstrated satisfactory results, with gross slippages reverting to pre-Covid levels, hovering at around 3 per cent. Furthermore, the NNPA ratio is flattish QoQ at 1.12 per cent.

Going ahead, management has guided pressure on NIMs for FY24 as repricing of deposits is to yet to be totally reflected in numbers (NIMs guidance of 8.5 per cent). However, management is confident to maintain 2 per cent RoAA in spite of NIMs compression primarily due to lower credit cost and operating efficiencies picking up in coming quarters.

We maintain our Buy recommendation and value Eqiutas SFB at 2x ABVE for FY25, resulting in a TP of ₹115.