This Midcap Bank Stock Likely To Soar 53%, "Add" Says HDFC Securities

HDFC Securities has assigned an "Add" call on the stock of Ujjivan Small Finance Bank Ltd. with a target price of Rs 45 apiece. If you buy the stock at the current market price, it could fetch a gain of up to 53% from its current market price. This is a small finance bank with a market valuation of Rs 5,765.79 crore. The bank is among the leading small finance banks in India. It is a midcap banking sector stock. Below are the key highlights of the stock:

Ujjivan Small Finance Bank Ltd. Stock performance

The stock of Ujjivan Small Finance Bank on Friday last traded at Rs 29.50 apiece, falling 0.34% as compared to its previous close of Rs 29.60 apiece. It recorded the 52-week low on 23 June 2022 at Rs 13.50 apiece and the 52 week high on 14 December 2022 at Rs 33.50 apiece, respectively. In the past week it has gained 7.27%, whereas falls 4.38%. in the past 1 month. In 3 months it gained 11.53%. In the past 1 year, it gained 52.45%. However, in the past 3 years, it has fallen 44.6%. The stock was listed on 12 December 2019 on the stock exchange. It has given a negative 47.27% return since its listing date.

 

Valuation - Sharp portfolio rebound; towards steady normalisation

According to the HDFC securities, Ujjivan SFB's Q3FY23 earnings beat estimates, led by strong loan growth (+27% YoY) and write-back in provisions. Ujjivan's investments in franchise building, distribution network and marketing activities led to strong sequential traction in deposits, reflecting in a sharp NIM compression in the interim (down 40bps QoQ). Asset quality improved with a 140bps QoQ reduction in GNPA to 3.6% (supported by upgrades/write-offs) coupled with a 120bps sequential reduction in PAR>0, led by healthy collections. The management remains confident of incremental business traction and has guided robust loan growth, led by renewed focus across segments. "With super-normal recoveries from the written off pool largely absorbed and continued elevated spends, we expect cost-toincome and credit costs to normalise hereon. We tweak our FY23/24 estimates; maintain ADD on Ujjivan SFB, with a revised TP of INR45," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.