Emkay Global
AU Small Fin (Hold)
Target: ₹800
CMP: ₹773.60
Despite subdued business growth, moderate margins and elevated provisions (including Covid-19-related contingent provisions of ₹180 crore), the bank reported a PAT of ₹200 crore, beating estimates, mainly due to treasury gains and the stake sale in Aavas (₹24 crore).
AUM grew 17 per cent y-o-y (down 3 per cent q-o-q) to ₹30,000 crore. Disbursements were down 70 per cent y-o-y (76 per cent q-o-q) at ₹1,180 crore, including disbursements under TLTRO 2.0 of ₹250 crore. Deposit growth has been strong at 35 per cent y-o-y to ₹26,700 crore, with the deposits/AUM ratio now at a high of 89 per cent. However, the CASA ratio ex-CDs too remains low at 16 per cent.
Cumulative full EMI billed/collection ratio stands at 75 per cent, while customers with zero/no EMI collection stands at 11 per cent of the portfolio. The bank has accelerated specific PCR to 64 per cent, while Covid-19-related contingent provisions stand at ₹280 crore (1 per cent of AUM).
We maintain Hold/UW in EAP, with a revised target of ₹800 (earlier ₹535). The bank has reported improvement in collection efficiency, but we believe that the stock’s performance hereon will largely track the bank’s ability to manage its asset quality.