Sharekhan's research report on AU Small Finance Bank
The bank has been guiding for 25-30% loan growth in the near to medium term. We believe upside risk to loan growth guidance remains, although balance-sheet growth focus has shifted from asset-led to liability-led strategy. We are not unduly concerned about the high opex growth as we believe accelerated investments continue to uplift the franchise to sustain growth and expand more steams of revenue and activities, with the eventual goal of becoming a universal bank. The stock is currently trading at 3.1x/2.7x its FY2024E/FY2025E ABV. Near-term focus would be on RBI’s approval for the reappointment of its existing MD and CEO, where the tenure ends in April 2023.
Outlook
We retain our Buy rating on AU SFB with an unchanged PT of Rs. 800. AU SFB has built a solid franchise and has a clear road map for its sustainable growth path with the right strategy in place on both asset as well as liability sides along with strong execution capabilities.
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