ICICI Securities
AU Small Finance Bank (Add)
CMP: ₹1,147
Target: ₹1,330
AU Small Finance Bank (AU SFB), in its eleven quarters as small finance bank, has exhibited excellent execution on most business metrics. This includes a) diversification of asset mix with consistent launch of new products; b) rollout of a robust digital platform with many first-in-industry and best-in-class banking initiatives such as WhatsApp account opening, minimal paperwork with no deposit or withdrawal slips, branch-agnostic account opening, etc; c) early verticalisation of businesses considering the pace of balance sheet expansion; d) tight control over operating expenses even during transition phase (FY17-19); and e) superior asset quality, especially in the current challenging environment without compromising on the growth momentum.
AU SFB’s industry-leading AuM growth (37 per cent y-o-y) in Q3FY20 and pristine asset quality, amid macro headwinds, vindicates the management’s execution capabilities and the bank’s resilient business model.
We upgrade to ‘Add’ (earlier Hold) with revised target price of ₹1,330 (earlier ₹980) as we increase our target multiple to 6.5x to reflect management’s excellent execution of small finance bank strategy.