We have revised our NII estimates by 8.2%/4.5%/0.9%, PPOP estimates by 23.9%/10.5%/7.2% and PAT estimates by 5.4%/3.7%/2.2% for FY20/FY21/FY22, respectively. We have retained Buy rating on USFL, valuing the stock at 1.8x H1FY22E P/BV and revising our target price to Rs435 (from Rs427 earlier).
Though solid performance continues, the separate listing of Ujjivan Small Finance Bank will be negative for the current shareholders, as it will ultimately lead to a considerable holding company discount and dilution. Hence, we reduce our valuation to 1.4x FY21E Adj.BVPS (previous 1.95x) and arrive at a target price of Rs 276, and downgrade our rating to Reduce from Accumulate.
We have revised our NII estimates by 7.3%/15.2%, PPOP estimates by 38.0%/54.6% and PAT estimates by 11.1%/15.5% for FY20/FY21, respectively. We have retained Buy rating on USFL, valuing the stock at 1.7x FY21E P/BV and revising our target price to Rs415 (from Rs402 earlier).
Strong Growth Outlook; Encouraging Liability-Side Initiatives. Ujjivan Financial Services (UFSL) reported its 4QFY19 results with the key pointers being: (1) NIM at 11.7% remains on a strong footing; liability initiatives seem encouraging (2) Non-micro banking business traction remains strong with share rising to 15.3% compared to 7.3% a year ago (3) Slowdown in branch expansion pace to improve cost metrics going forward. Per se, on the key P&L items, UFSL posted NII growth of 36% YoY at Rs2,862mn, PPOP decline of 36% YoY at Rs853mn and PAT decline of 2% YoY to Rs638mn. We have revised our estimates for FY20/FY21 and retained Buy rating on UFSL, revising our target price to Rs406 (from Rs402 earlier), valuing the stock at 1.9x FY21E P/BV.
Strong operating performance…. Ujjivan Small Finance Bank serves over 41 lakh asset customers through 522 branches and 14,305 employees spread across 223 districts and 24 states in India with Gross Loan Book stands at Rs9,350cr. It has over 464 full-service banking outlets with a deposit base of Rs5,362cr. • Strong growth in Net Interest Income (Interest income less interest expense), by 33% YoY on the back of 31% YoY growth in advances. • Reported a Net Profit of Rs45cr in Q3FY19 against Rs30cr in Q3FY18, mainly on account of increased other income and lower provisioning. • Net Interest Margin (NIM) has remained stable at 11.8% in Q3 FY19 as compared to Q3FY18. • GNPA improved to 1.4% and NNPA to 0.3% in Q3FY19 against 4.2% and 1.0% respectively in Q3 FY18. • Deposit reached Rs5,376cr in Q3FY19, marking a 118% YoY growth. • The long-term outlook remains positive on back of steady growth in loans as well as earnings. However, the mandate to list the bank separately adds concerns. Hence, we value at 1.6x FY21E Adj. BV and recommend to Accumulate with a revised target price of Rs334.