Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Maintain ADD on AU Small Finance Bank - Negative surprise to the asset quality - HDFC Securities

Posted On: 2021-05-04 12:18:30 (Time Zone: UTC)

Mr. Bansi Desai, CFA, HDFC Securities and Mr. Karan Vora, Institutional Research Analyst, HDFC Securities

AU Small Finance Bank's (AUBANK) 4QFY21 PPOP growth was below expectations due to higher-than-expected operating expenses, partially offset by higher fee income (PSLC etc). Balance sheet continued its strong momentum of growth (AUM/disbursement growth of ~14% QoQ), driven by wheels, SBL, and housing. However, the bank surprised negatively on the asset quality front with GNPAs at 4.3% (pro-forma GNPA at 3.3% in 3QFY21), far higher than our expectations. We revise our FY22/FY23 earnings downwards by 9.9%/6.5%, primarily on account of higher LLP, although LGDs are likely to remain unchanged. Maintain ADD with revised TP of INR1,056.

Subdued P&L performance; growth outshines: AUBANK reported NII growth of 18% YoY, reflating NIMs (5.3%) and C/I ratio of 60% (3QFY21: 52%). The bank resumed its expansion mode with addition of 43 branches and 3.5K employees during the quarter to drive business growth. Disbursements /AUMs grew by ~14% QoQ, and are poised for strong growth in FY22 as well. CASA ratio improved to ~23% (3QFY21: 21%) with cost of SA at 5.7%.

Negative surprises in asset quality: AUBANK's reported GNPA (4.3%) came in way higher than our expectations with pro-forma slippages at ~6% of AUM. While the management has indicated that INR5.4bn of GNPAs are making some form of payments, we remain watchful for such slippages in the next few quarters. The bulk of the slippages were from the Wheels and SBL-MSME segment with LGDs <40% and <30% respectively. Restructured book is also on the higher side at ~2% of AUM. We increase our LLP estimates for FY22 and FY23 by 0.4%/0.3% on account of this disclosure.

Rich valuations leave little room for error; maintain ADD: AUBANK's rich valuations and its track record on asset quality leave little room for such negative surprises. We remain watchful for further developments in the next few quarters on the asset quality front. However, the bank's high steady- state profitability, high growth, and robust asset quality in segments with high-yields have warranted premium valuation. Maintain ADD.

Shares of AU Small Finance Bank Ltd was last trading in BSE at Rs.915.35 as compared to the previous close of Rs. 923.85. The total number of shares traded during the day was 102711 in over 4250 trades.

The stock hit an intraday high of Rs. 957.65 and intraday low of 913. The net turnover during the day was Rs. 95932148.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Maintain BUY on CreditAccess Grameen - Accelerated write-offs dents earnings - HDFC Securities

Sundram Fasteners Q4 Results Review - HDFC Securities

SRF - Specialty Chemicals continues to shine! - HDFC Securities

Realtors welcome RBI latest stance, expect relief initiatives in next announcement

CreditAccess Grameen - Q4FY21 Result Update - ICICI Securities

JM Financial - Exits FY21 with well contained stress pool; sequential AUM uptick encouraging - ICICI Securities

Hero MotoCorp - Margins remain resilient - ICICI Securities

CEAT - Margin pressures likely to intensify - ICICI Securities

SRF Limited - FY22E growth capped on higher plants utilisation - ICICI Securities

I-direct Instinct - Automotive Axles - ICICI Direct

Quant Pick - Axis Bank - ICICI Direct

Gladiator Stocks - Caplin Point Laboratories - ICICI Direct

Q4FY21 Result Update - Coforge Ltd - ICICI Direct

Tata Consumer Products - Q4FY21 First Cut - ICICI Direct

Coforge Ltd - Q4FY21 Result Update - YES Securities

CreditAccess Grameen - Q4FY21 Result Update - YES Securities

Blue Star - Q4 FY21 first cut - Inline performance - YES Securities

Tata Consumer - 4QFY21 results first cut - YES Securities

Tata Consumer 4QFY21 results first cut - YES Securities

Maintain BUY on CDSL - Strong growth momentum - HDFC Securities

Maintain ADD on L&T Infotech - Steady progression - HDFC Securities

Blue Dart Express - Q4FY21 - The bulge continues - ICICI Securities

Tata Steel - FY22E Net Debt/EBITDA at <1x - ICICI Securities

Larsen & Toubro Infotech - Consistency continues! - ICICI Securities

CEAT - Decent quarter; new capex likely to curtail FCF - ICICI Securities

Q4FY21 Result Update - Alembic Pharma - ICICI Direct

Gladiator Stocks - Cadila Healthcare - ICICI Direct

Q4FY21 Result Update - Larsen & Toubro Infotech - ICICI Direct

RBI Action Update - May 2021 - ICICI Direct

Quant Pick - Aurobindo Pharma - ICICI Direct

Q4FY21 Result Update - Greaves Cotton - ICICI Direct

Adani Total Gas Ltd - Q4FY21 Result Update - YES Securities

L&T Infotech - Q4FY21 Result Update - YES Securities

Bluedart Express - Q4 FY21 first cut - Miss on topline; Profitability improves - YES Securities

Views on the announcement by RBI Governor - Ms. Bekxy Kuriakose, Head - Fixed Income, Principal Asset Management

Views from experts on RBI announcement - May 5, 2021

Maintain REDUCE on RBL Bank - Elevated retail slippages continue - HDFC Securities

Resolution 2.0 measure by RBI to provide relief to real estate linked SME stakeholders

Godrej Properties - Robust quarter; positives fairly priced in - HDFC Securities

RBI Relief 2.0 - May 2021 - Acuité Ratings & Research

MDF Industry - Countervailing duty on MDF recommended; imports may get hit structurally - ICICI Securities

Home First Finance Company - Core earnings steady; profitability buoyed by securitisation income - ICICI Securities

RBL Bank - Modest return profile in the interim; transitioning underway - ICICI Securities

Alembic Pharmaceuticals - US continues to be under pressure - ICICI Securities

Q4FY21 Result Update - SBI Life Insurance - ICICI Direct

Q1CY21 Result Update - Varun Beverages - ICICI Direct

RBL Bank: Views from leading research houses on Q4FY21 results

Q4FY21 Result Update - Supreme Industries - ICICI Direct

Q4FY21 Result Update - Tata Chemicals - ICICI Direct

Larsen & Toubro Infotech - Q4FY21 First Cut - ICICI Direct

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020