Buy AU Small Finance Bank; target of Rs 479: Cholamandalam securities

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Cholamandalam securities' research report on AU Small Finance Bank

The bank’s loan AUM increased by 27.4% YoY (3.4 % QoQ) to ₹308.9bn driven by strong growth in Retail segment, up 37.6% YoY. Within retail segment Housing loans increased by 4.9x, coupled with wheels and SBL-MSME segment which registered 27% YoY and 43.5% YoY, growth respectively. During the year, disbursements witnessed growth of 16% YoY and stood at ₹186.3bn. This growth was led by retail assets (up 27% YoY in FY20) and stood at ₹150.4bn despite de-growth in Small and Mid-Corporate Segment (-16% YoY). The support for retail segment growth came from SBL-MSME (up 32% YoY) and Wheels (up 16% YoY) in FY20.

Outlook

Assigning a P/ABV of 2.5x for FY22E, we arrive at a target of ₹479, and hence upgrade our rating on the stock from MARKET PERFORMER to BUY.

For all recommendations report, click here

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