AU SFB shares at Rs 800 or Rs 1,275? Targets by JPMorgan, Morgan Stanley, MOFSL and others

AU Small Finance Bank Ltd shares rallied nearly 5 per cent in Monday's trade after the lender reported another strong June quarter, driven by healthy business momentum across advances and deposits. The quarter was marked by robust balance sheet growth, sustained margins, improving profitability and continued normalisation in asset quality. Following the results, the stock rose 4.90 per cent to hit an intraday high of Rs 1,051.45 on BSE. Among brokerages, MOFSL has the highest target price of Rs 1,275 on the stock, while BNP Paribas has the lowest at Rs 800, revised targets available for 25 brokerages suggest.

Centrum Broking said AU SFB's profit grew 37 per cent YoY for the quarter to Rs 796 crore, supported by 23 per cent loan growth and 24 per cent deposit growth. Net interest margin (NIM), it said, remained robust at 5.9 per cent despite a moderating rate environment.

"The quarter also reflected continued investments in technology, manpower and distribution, which kept operating expenses elevated but position the bank for sustained operating leverage over the medium term. CoF has effectively bottomed and could edge up, with asset mix remaining the key swing factor on margins going forward," the brokerage said as it suggested 'Buy' and a target of Rs 1,004 on the stock.

Analysts noted that the one-time Rs 23 crore provisioning charge by AU SFB in Q1 reflected a harmonization of provisioning norms across unsecured products rather than a shift in credit cost trajectory. The management, they said, expects incremental improvement in OpEx and credit cost lines through FY27, which may help close the gap to its 1.8 per cent return on asset (RoA) target.

This is even as the bank refrained from providing NIM guidance. AU SFB remained confident of delivering growth at 2-2.5 times India's nominal GDP, led by secured retail businesses including mortgages, commercial banking and gold loan, analysts said.

Ashika Stock Broking continued advances and deposits growth at 23 per cent and 22 per cent respectively, over FY26-FY28, resulting in RoA of 1.8 per cent and return on equity (RoE) of 18.1 per cent by FY28E.

It sees AUSFB as a compelling structural growth story, supported by its diversified lending franchise, strong liability mobilisation and tech-led execution.

"The impending transition to a Universal Bank remains a key catalyst, with the potential to lower the cost of funds (CoF), broaden liability acquisition and enhance fee income. We continue to value AUBANK at 3.25x June'28E ABV (in line with its 5-yr average P/ABV), implying a target price (TP) of Rs1,195. We maintain BUY," the brokerage said.

With TD repricing benefits largely behind it, the incremental NIM trajectory will hinge on loan and liability mix, said Equirus Securities.

"With repo rate hikes likely to be deferred, AUBANK remains well placed to sustain current NIMs. Despite our concerns over potential asset-quality stress in vehicle finance amid fuel price hikes and supply constraints, slippages remained contained. We broadly retain earnings estimates, maintain ADD, and reiterate our Mar'27 target of Rs 1,145, based on an unchanged 3.2x Mar'28 ABV," said Equirus Securities.

JM Financial shared similar views. It said the universal bank transition remains a key structural growth driver, aiding its premium valuation. "We marginally increase FY27E/28E EPS and forecast an average RoA/RoE of 1.7 per cent/17 per cent over FY27–28E. We upgrade to BUY (from ADD), while maintaining our valuation multiple of 3.1x FY28E P/BV with a revised target of Rs 1,165 (up from Rs 1,100)," JM said.

ICICI Securities said bank’s strong Q1 financial performance underscored its strengthening asset quality trends and sustained credit momentum. This brokerage suggested 'Buy' on JM and a target of Rs 1,250.

The said, the Bloomberg consensus target on the stock at Rs 1,039.40 suggests limited upside potential on the counter. Kotak and Ambit Capital suggested 'Sell' on the stock with targets of Rs 925 and Rs 900, respectively. Nomura and UBS are 'Neutral' on the stock with targets of Rs 1,180 and Rs 1,150, respectively. Jefferies and Investec set a target of Rs 1,270 on the stock. JPMorgan sees the stock at Rs 1,230 and Morgan Stanley at Rs 1,205.