Bank Stocks to BUY: There were ups and downs in the stock market in the early trading on Friday (January 24). The market slipped after a strong start. There is action in selected stocks on the basis of the results of the third quarter (Q3FY25) in the market turmoil. After Q3, brokerage houses are bullish on banking shares Ujjivan Small Finance Bank and are advising buying. He says that the bank’s results were as per expectations in tough times. The bank is continuously making profits from retail business. Currently, this stock is trading near its 52-week low, about 47 percent below its all-time high. The stock fell more than 4.5 percent in the early hours of Friday.
Ujjivan SFB: Targets up to 70 percent upside
Brokerage firm Centrum Broking has maintained a buy advisory on the stock of Ujjivan Small Finance Bank. Also, the target price per share has been increased from Rs 58 to Rs 59. The share was at Rs 34 on Thursday. In this way, from the current price, the stock can see a strong return of about 70 percent in future.
ICICI Securities has upgraded Ujjivan SFB from Hold to BUY rating. Target price has been increased from Rs 36 to Rs 45 per share. Which is about 32 percent more than the current price.
Ujjivan SFB: What is the brokerage commentary?
Centrum Broking says that the bank’s results were as expected in difficult macro conditions. Micro finance portfolio (MFI) pressure is expected to reduce from the fourth quarter (Q4FY25). The bank’s interest income (NII) increased by 3 per cent (YoY) to Rs 890 crore. Which was less than the estimate of Rs 940 crore. The cost and assets of the bank have increased.
Credit costs increased to 2.93% (Q3FY25) from 1.99% (Q2FY25), the brokerage says. Management estimates credit costs between 2.3–2.5% for FY25. Return on Assets (RoA) was 1.0% and Return on Equity (RoE) was 7.3%. Improvement in loan disbursement is expected in Q4. Overall loan growth is estimated to be 9 percent in FY25. Deposit growth may also remain in this range.
Additionally, the Board has approved the voluntary application for Universal Banking License and the management is focused on accelerating the business at the Gemini level. Additionally, the bank has reduced the yield on its MFI portfolio by 115 bps on the JLG book and 75 bps on the IL book, to remain competitive and customer preferred before the new regulatory structure comes into effect from April 1, 2025. Remaining.
ICICI Securities says that the bank’s retail portfolio is continuously generating profits. There is pressure on MFI business. Which may reduce further. Ujjivan’s asset quality performance has been better in its industry. Therefore, it is believed that RoE may remain above 14% in FY26–27E.
Ujjivan SFB: Shares fell
There is a decline in the stock after the results. On Friday, shares of Ujjivan Small Finance Bank opened at Rs 33 with a fall of about 4.5 per cent. The stock closed at Rs 34.56 on Thursday. In the last one year, this stock has fallen 40 percent and 47 percent from its record high. The stock’s 52-week high on BSE is 61.30 and low is 32. Its market cap is more than Rs 6300 crore.
Ujjivan SFB: How were the Q3 results?
Ujjivan Small Finance Bank’s net declined by 64 per cent (YoY) to Rs 109 crore in December 2024 quarter. The bank had earned a profit of Rs 300 crore in the same quarter a year ago. The total income of the bank in Q3 reached Rs 1,591 crore. It was Rs 1,471 crore in the same quarter a year ago.
The bank’s net interest income (NII) jumped 3.1 per cent to Rs 887 crore in Q3. Operating profit declined from Rs 457 crore to Rs 359 crore (YoY). Earning per share (EPS) declined from Rs 1.53 to 56 paise.
The bank’s gross NPA increased to 2.68 percent, which was 2.52 percent in the September quarter and 2.18 percent in the same quarter a year ago. Net NPA stood at 0.56 percent which was 0.56 percent in the September quarter and 0.17 percent a year ago.
(Disclaimer: The advice to buy stocks here is given by the brokerage house. Investing in the market is subject to risks. Consult your advisor before taking any investment decision.)