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Axis Securities Report
Robust growth, improving core fee income profile (with AD-1 license aiding fee income prospects), and steady credit costs should aid earnings traction for the Equitas Small Finance Bank Ltd. as we expect earnings growth of ~28% compound annual growth rate over FY23-26E.
We introduce FY26E estimates and roll forward to September-25E adjusted book value, keeping our valuation multiple unchanged at 2.0 times.
Equitas SFB has run up in the last week (+14%), despite which we believe a diversified and secured loan book, long growth runway and stable asset quality leave some room for further upside.
We maintain our 'Buy' recommendation on the stock with a revised target price of Rs 125, implying an upside of 15% from current market price.
Key risks to our estimates and target price
The key risk to our estimates remains a slowdown in overall credit growth which could potentially derail our earnings estimates.
Asset quality challenges in the new segments that the bank plans to roll-out.
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