AU SFB shares drop 3% post Q4 results as risk-reward looks unattractive; here're stock price targets
AU SFB share price: At 3 times FY25 book value, AU SFB stock is expensive because its RoA is equal to or lower than peers including such as ICICI Bank, HDFC Bank and IndusInd Bank that trade cheaper, said a brokerage.
- Apr 26, 2023,
- Updated Apr 26, 2023 9:54 AM IST
Shares of AU Small Finance Bank (AU SFB) fell 4 per cent in Wednesday's trade, as no positive surprises in the March quarter results prompted analysts suggesting the stock valuations are unreasonable and that risk-reward is better elsewhere.
Kotak Institutional Equities has downgraded the stock to 'Sell' from ‘Reduce’ due to expensive valuations. The brokerage has, however, increased its target price for the stock to Rs 600 from Rs 575 earlier. "Having demonstrated consistent execution capability in the past few years, AU SFB continues to position itself as a franchise for the long term. However, valuations remain high," the brokerage said.
AU SFB reported a 23 per cent YoY rise in profit at Rs 425 crore in the March quarter on a 37 per cent rise in net interest income at Rs 4,425 crore. The stock declined 3.73 per cent to hit a low of Rs 635.35 on BSE.
Numava Institutional Equities said it tweaked its earning but retained its target at Rs 560, as it finds valuations expensive for the bank’s medium-term return on asset (RoA) profile. At 3 times FY25 book value, AU SFB is expensive because its RoA is equal to or lower than peers including such as ICICI Bank, HDFC Bank and IndusInd Bank, which trade cheaper.
"While AU’s loan growth is higher, its weaker deposit profile and higher opex yield an RoA that is equal to/lower than peers," it said adding that "we find better value in other banks."
Emkay Global said the RBI recently approved MD & CEO Sanjay Agarwal's and WTD Uttam Tibrewal's reappointment for the next 3 years till 2026, thereby removing a major overhang, particularly post the spate of resignations in risk/compliance last year that raised concerns.
That said, the brokerage has retained its 'HOLD' rating on the stock, with revised target of Rs 700 per share, valuing the standalone bank at 3.2 times FY25E adjusted book value (ABV) against 3.4 times Dec-24E ABV earlier.
Motilal Oswal Securities said AU SFB reported an in-line quarter, supported by lower provisions and tax reversals. However, the operating performance saw a slight miss, with margins moderating sequentially. This brokerage has a ‘Buy’ rating on the stock with a target of Rs 760.
Also read: Bajaj Finance Q4 results preview: Profit may surge 23-30% on strong NII growth, stable credit cost
Also read: Nestle, SBI Life, Maruti Suzuki: How to trade these stocks amid results buzz?
Shares of AU Small Finance Bank (AU SFB) fell 4 per cent in Wednesday's trade, as no positive surprises in the March quarter results prompted analysts suggesting the stock valuations are unreasonable and that risk-reward is better elsewhere.
Kotak Institutional Equities has downgraded the stock to 'Sell' from ‘Reduce’ due to expensive valuations. The brokerage has, however, increased its target price for the stock to Rs 600 from Rs 575 earlier. "Having demonstrated consistent execution capability in the past few years, AU SFB continues to position itself as a franchise for the long term. However, valuations remain high," the brokerage said.
AU SFB reported a 23 per cent YoY rise in profit at Rs 425 crore in the March quarter on a 37 per cent rise in net interest income at Rs 4,425 crore. The stock declined 3.73 per cent to hit a low of Rs 635.35 on BSE.
Numava Institutional Equities said it tweaked its earning but retained its target at Rs 560, as it finds valuations expensive for the bank’s medium-term return on asset (RoA) profile. At 3 times FY25 book value, AU SFB is expensive because its RoA is equal to or lower than peers including such as ICICI Bank, HDFC Bank and IndusInd Bank, which trade cheaper.
"While AU’s loan growth is higher, its weaker deposit profile and higher opex yield an RoA that is equal to/lower than peers," it said adding that "we find better value in other banks."
Emkay Global said the RBI recently approved MD & CEO Sanjay Agarwal's and WTD Uttam Tibrewal's reappointment for the next 3 years till 2026, thereby removing a major overhang, particularly post the spate of resignations in risk/compliance last year that raised concerns.
That said, the brokerage has retained its 'HOLD' rating on the stock, with revised target of Rs 700 per share, valuing the standalone bank at 3.2 times FY25E adjusted book value (ABV) against 3.4 times Dec-24E ABV earlier.
Motilal Oswal Securities said AU SFB reported an in-line quarter, supported by lower provisions and tax reversals. However, the operating performance saw a slight miss, with margins moderating sequentially. This brokerage has a ‘Buy’ rating on the stock with a target of Rs 760.
Also read: Bajaj Finance Q4 results preview: Profit may surge 23-30% on strong NII growth, stable credit cost
Also read: Nestle, SBI Life, Maruti Suzuki: How to trade these stocks amid results buzz?