Buy AU Small Finance Bank, target price Rs 750: Motilal Oswal

Motilal Oswal has buy call on AU Small Finance Bank with a target price of Rs 750. The current market price of AU Small Finance Bank is Rs 674.15.

AU Small Finance Bank, incorporated in the year 1996, is a banking company (having a market cap of Rs 44802.03 Crore).

Au Small Finance Bank key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest and Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2022.

Financials
For the quarter ended 30-09-2022, the company has reported a Standalone Total Income of Rs 2239.65 Crore, up 13.15 % from last quarter Total Income of Rs 1979.35 Crore and up 40.36 % from last year same quarter Total Income of Rs 1595.65 Crore. The bank has reported net profit after tax of Rs 342.60 Crore in latest quarter.

Investment Rationale
The bank has been reporting a healthy performance, led by an expansion in margin and controlled credit cost. On the business front, growth in advances remains strong. The traction in deposits, particularly retail deposits, remains healthy. It carries contingent reserves of Rs 1.29 billion (25bp of loans), which, coupled with a 17%coverage on restructured assets, provides comfort. The brokerage expects 25% earnings CAGR over FY22-24, with a RoA/RoE of 1.8%/14.9% in FY24.

Promoter/FII Holdings
Promoters held 28.21 per cent stake in the company as of 30-Jun-2022, while FIIs owned 35.07 per cent, DIIs 18.41 per cent.