Buy Equitas Small Finance Bank; target of Rs 125: Motilal Oswal

Motilal Oswal's research report on Equitas Small Finance Bank

EQUITASB has been delivering consistent performance, with steady improvements in both asset quality and return ratios. The bank is well poised to report steady operating performance, backed by robust loan growth, healthy margins, and controlled credit costs. The bank focuses on building a diversified loan book, with Small Business Loans (SBL), Vehicle Finance, and Housing Finance being the key business segments. Loan growth was strong at ~25% YoY in 9MFY24 and we estimate a 22% CAGR in loans over FY24-26E. EQUITASB has made good progress in building a granular liability franchise, with a rising mix of retail deposits. Also, the CD ratio of the bank remains comfortable at 90% (vs. ~99.5% in 3QFY23). We expect deposit traction to remain strong, led by healthy growth in retail term deposits, while CASA mix declines further.

Outlook

We estimate EQUITASB to deliver FY26E RoA/RoE of 2.0%/17.3% and value it at INR125 (1.9x FY26E ABV). Reiterate BUY.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Equitas Small Finance Bank - 19042024 - moti