Shares of AU Small Finance Bank cracked almost 7% in intraday trade on BSE on October 20, a day after the company released its September quarter scorecard.
The stock opened at ₹627.85 against the previous close of ₹626.45 and fell as much as 6.56% to hit an intraday low of ₹585.35.
The stock finally closed 5.46% lower at ₹592.25, snapping the four-day winning run.
The bank on October 19 said its Q2FY23 net profit rose 28% quarter-on-quarter (QoQ), coming at ₹343 crore. Total income for the quarter stood at ₹2,240 crore, up 13% QoQ.
Net interest income (NII) for the quarter came at ₹1,083 crore which was 11% more than the previous quarter. Net interest margin (NIM) for the quarter was at 6.2% compared to 5.9% in Q1FY23.
Deposits grew by 7% QoQ and 11% YTD to ₹58,335 crore while the bank's total balance sheet grow by 10% QoQ and 13% YTD to ₹77,878 crore. CASA at the end of the quarter under review was at 42% as against 39% at the end of Q1FY23 and 37% at the end of Q4FY22.
The numbers were positive and even beat the estimates of some brokerages. However, the stock traded lower as there were no significant upside revisions on the estimates of brokerages.
So far, the year has been good for the stock. As of October 20, the stock is up 14% year-to-date. It hit a 52-week high of ₹732.90 on April 21, 2022; it is down 19% at present from its 52-week high.
Brokerages retain views, remain mixed
Brokerage firm Emkay Global Financial Services has retained a 'hold' call on the stock with a target price of ₹650.
"Factoring in the 2% earnings upgrade owing to better margin trajectory and the recent capital raise leading to BV accretion, we increase our target price to ₹650 from ₹630, valuing the bank at 3.5 times Jun-24E ABV versus 3.8 times Jun-24E ABV (pre-capital raise). We retain a 'hold' on the stock, but believe that it would be prudent for the bank to further strengthen its risk/compliance architecture before its planned transition into becoming a universal bank," said Emkay.
HDFC Securities has maintained its 'reduce' call on the stock with a target price of ₹594 even as it said the bank's earnings beat its estimates predominantly on the back of stronger-than-anticipated margins, partly offset by high operating expenses.
"Continued investments in franchise-building and new businesses are likely to drag the medium-term profitability vectors; however, we continue to watch out for visibility on operating leverage before we can turn constructive," said HDFC Securities.
HDFC lowered its FY23E and FY24E estimates by 3% and 5%, respectively, for higher opex.
Motilal Oswal Financial Services has a 'buy' call on the stock with a target price of ₹700. The brokerage firm said it had largely maintained its estimates as higher NII and lower provisions get offset by higher opex, due to sustained investments in building the franchise.
"We estimate AU Small Finance Bank to deliver 25% earnings CAGR over FY22–24 with an RoA and RoE of 1.8% and 14.9% in FY24E, respectively," said Motilal Oswal.
Brokerage firm Elara Capital has an 'accumulate' call on the stock with a target price of ₹675 while it underscored that the bank posted an impressive Q2FY23 performance, with consistent progress on key metrics.
"Our prognosis of the bank’s long-term growth and quality remains unchanged, with impressive performance despite challenges vindicating our confidence in its execution capabilities. While reduced uncertainty and strong loan growth may continue to yield a premium multiple, trading at 3.3 times FY24E P/BV renders a valuation constraint," said Elara.
"We recommend an 'accumulate' with a target price of ₹675, assigning 3.5 times FY24E BV and 14.5 times FY24E P/E for RoE of nearly 15% (post capital raise)," Elara added.
According to a MintGenie poll, an average of 20 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of broking firms. These do not represent the views of MintGenie.