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Axis Securities Report
According to Axis Securities, the RBI's return of Ujjivan Small Finance Bank Ltd.'s universal banking license application is a near-term speed bump and not a structural impediment.
Ujjivan SFB appears to have cleared all the financial eligibility criteria, and the single issue of portfolio diversification (higher MFI proportion) is also being actively addressed. Moreover, as highlighted earlier in its Analyst Meet, the bank's strategic roadmap for FY30 remains agnostic to the issuance of the Universal Banking license.
While this development will be sentimentally negative and will weigh on the stock price, the brokerage believes this is a good accumulation opportunity. Q4 should see a strong performance, and it expects improved performance over the medium term with improving credit costs and lower Opex ratios, adequately offsetting NIM compression (on account of portfolio mix shift), driving return on asset/return on equity improvement to 1.7-1.9%/15-18% over FY27-28E.
Axis Securities reiterate its Buy recommendation on the stock with an unchanged target price of Rs 74/share, implying an upside of 23% from the current market price.
The brokerage values Ujivan SFB at 1.8x Sep'27E adjusted book value vs its current valuation of 1.5x Sep'27E ABV.
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