Ujjivan Small Finance Bank shares rose over 11 per cent in Monday’s trade and have risen over 15 per cent in the last three trading sessions after the firm on Thursday reported a 60% year-on-year (YoY) rise in net profit at Rs 324 for the quarter ending June 30.
The stock jumped 10.92 per cent to hit a high of Rs 49.13 on BSE. This was the highest level for the stock since February 2020.
Its net interest income rose 32 per cent YoY to Rs 793 crore, while the net interest margin was down 40 basis points to 9.2 per cent due to the lagged effect of the deposit rate rise.
Gross non-performing assets stood at 2.4% against 5.9% a year back. Net NPA was at 0.06 per cent.
The bank’s deposit base rose 45 per cent YoY to Rs 26,660 crore. The ratio of current and savings account to total deposits rose 27 per cent to 24.6% at the end of the reporting period.
Should you buy, sell or hold Ujjivan Small Finance Bank’s stock?
Analysts are largely positive on the stock’s prospects that has rallied 133 per cent in the last one year.
Emkay Global has raised its FY24-26 earnings estimates by 5-17 per cent and expect bank to log the best return on asset of 2.5-3.4 per cent and return on equity of 22-28 per cent during the period.
“Deposit growth remained strong at 45 per cent YoY, but CASA slipped to a low of 25 per cent. Going forward, the bank expects growth as well as margin to remain strong, but LLP normalisation in 2H should lead to some moderation in RoA, albeit remain above 3 per cent. Bank expects to complete the reverse merger of the holdco soon, while the process to identify the successor of the current MD (internal/external) is work in progress,” the brokerage said.
Emkay Global sees the stock at Rs 58.
“Having flagged off FY24 on a strong note, the management remains committed to sustaining business growth momentum, maintaining healthy asset quality (eyeing exit-GNPA of 2 per cent in FY24) and delivering strong profitability. With Ittira Davis (MD CEO) slated to retire by January, the bank is identifying a suitable successor and has assured of an appointment to be made ahead of time, to ensure a smooth management transition,” Axis Securities said. This brokerage finds Ujjivan SFB worth Rs 54.
HDFC Institutional Equities said despite a strong sequential traction in deposits, back-book repricing in the MFI portfolio supported NIM expansion. It said gross NPA ratio improved sequentially to 2.6 per cent on the back of strong upgrades/write-offs despite seasonally higher slippages.
“While Ujjivan has absorbed most of the surplus liquidity on its balance sheet, incremental pressure on funding costs and high opex intensity from franchise-building investments are likely to restrict productivity gains. We adjust our FY24/25 estimates for improvement in yields and credit costs; maintain ADD with a revised target of Rs 50,” it said.
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