HDFC Securities has maintained 'buy' rating on AU Small Finance Bank at a target price of Rs 807 per share, an upside potential of over 17 percent over the long-term.
At 10.03 am, shares of AU Small Finance Bank Ltd quoted at Rs 696.20 per share, up over a percent on the NSE. The stock opened at Rs 700, gaining from its previous close of Rs 689.25.
"We like AU Bank's ability to sustain quality growth, particularly in challenging environs. This, we believe, is reflective of its NBFC roots even as it gains from the troubles faced by erstwhile peers. While asset quality remains stable, the bank’s NBFC/RE exposure does hold some risk. Superior return ratios and improving performance across metrics warrant premium multiples," HDFC Securities said in a research report on Tuesday.
The Jaipur-based AU Small Finance Bank reported an 89 percent jump in its net profit at Rs 172 crore in the quarter ended September due to a decline in cost-to-income ratio. It had reported a profit after tax of Rs 91 crore in the same period last year.
The lender's cost to income stood at 53.9 percent as against 60.5 percent in the year-ago period. The decline in the ratio was due to improving the operational efficiency of bank branches, the bank said.
Gross NPA remained stable at 2 percent and net NPA improved to 1.1 percent from 1.3 percent in the year-ago period. Provision coverage ratio was at around 44 percent.
Loans AUM grew at 38 percent y-o-y to Rs 27,876 crore and deposits grew 72 percent on-year to Rs 22,149 crore.
The bank's 79 percent of the loan book is retail with around 95 percent are secured. The average ticket size of the retail loan is Rs 5 lakh.
Another global brokerage firm Nomura has a neutral rating on AU Small Finance Bank in the long term with a target price of Rs 590.
So far this year, AU Small Finance Bank shares have gained over 12 percent, while the one-year return on the stock too is positive at over 31 percent. The stock has risen almost 8 percent in the last one week.
At 10.14 am, the Sensex gained 126 points higher, or 0.32 percent, to trade at 39,089. The NSE Nifty50 traded over 33 points higher, or 0.29 percent, at 11,622.
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-with inputs from PTI
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