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Motilal Oswal Report
Equitas Small Finance Bank Ltd. has demonstrated robust growth with a 26% compound annual growth rate in its loan book and a 38% CAGR in deposits from FY22-FY24, significantly improving its credit-deposit ratio from 102% to 86% and increasing the retail deposit mix to 69%.
Despite current challenges in the MFI sector, where its contribution has decreased to ~17%, the bank's ability to rebound from credit cycles with controlled credit cost suggests potential asset quality improvement from H2 FY25.
The stock has corrected 29% from its January 2024 peak. However, with sustained growth expected, a projected improvement in return on asset to 1.7% by FY26, and a current valuation of 1.2 times FY26 book value, Equitas SFB remains an attractive long-term investment.
We reiterate a Buy rating with a revised target price of Rs 100 (based on 1.6 times FY26E adjusted book value).
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