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Centrum Broking
Ujjivan Small Finance Bank (Buy)
CMP: ₹27
Target: ₹41
Ujjivan Small Finance Bank numbers were strong operationally as net interest income (NII) beat estimates driven by lower deposit cost and higher yield. Reported cost of funds fell by 50 bps y-o-y leading to a positive net interest margin (NIM) surprise.
Assets under management (AUM) growth was lower at 28.1 per cent y-o-y. Cost-to-income improved q-o-q by 6.7 per cent and GNPA (gross non-performing assets) was stable q-o-q.
CASA improved by 190 bps q-o-q to 13.5 per cent and liability customers are 80 per cent of total. Provisions of ₹70 crore were created on standstill accounts (at 38 per cent versus requirement of 10 per cent). 90 per cent/99 per cent of loans/customers have availed moratorium though 60 per cent of loans are in green/orange zones.
Customer survey indicates only 4 per cent of customers could see earnings disruption for 3-6 months. CAR is healthy with Tier-1 at 28.0 per cent. See FY22E RoA/RoE at 2.4 per cent/16.6 per cent. Maintain multiple at 1.9x FY22 ABV but revise TP to ₹41. Búy.
Risks: Lower AUM growth in FY21 and higher slippages.
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