This bank stock surges 8% in 5 days. Motilal Oswal sees over 30% upside from current levels
Premium- The brokerage has Buy rating on the bank stock with target price of ₹1,550 per share, implying 33% potential upside
Domestic brokerage and research firm Motilal Oswal attended AU Small Finance Bank's (SFB) virtual meet where the bank's management highlighted how the improved digital capabilities are helping the bank transform by driving business growth.
AU Small Finance Bank shares have rallied over 8% in the past five trading sessions. The brokerage sees more upside as it has Buy rating on the bank stock with target price of ₹1,550 per share, implying a potential upside of more than 33% from current levels.
The bank has been reporting a strong operating performance and robust business growth while asset quality has been particularly resilient amid a challenging economic environment.
“With an improvement in economic activity (as reflected by key economic indicators – GST collections, GDP growth, and PMI), the bank appears on track to deliver superior growth while retail deposit mix continues to improve supporting the margin profile. Collection efficiency stands healthy at 106% and the bank carries contingent reserves of ₹3 billion (75bp of loans), which provides further comfort," the note added.
Wheels and home loans are the key business drivers after strong push from the government for roads/other wheels-related infrastructure in the budget, as per Motilal Oswal.
AU Small Finance Bank has divided its business into 10 SBUs, where each SBU will have its own structure/growth strategy underpinned by shared verticals and support functions. The bank has been working on scaling up its digital banking across product range, which is aiding sustainable growth, the brokerage's note highlighted.
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The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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