Motilal Oswal Maintains 'Buy' On AU Small Finance Bank, Revises Target Price — Check Details

AU Small Finance Bank is gearing up for a major transformation as it prepares to transition into a universal bank following the Reserve Bank of India’s in-principle approval. The move is expected to strengthen its brand, unlock broader deposit pools, and accelerate growth across retail and commercial banking segments..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.AU Small Finance Bank Ltd. remains well-positioned to deliver best-in-class business growth and earnings CAGR, supported by steady improvement in operating metrics and strong execution across its diversified secured businesses. Secured businesses across vehicle finance, mortgages and commercial banking continue to perform well and offer a strong growth outlook in the coming years.Asset quality cycle is showing signs of bottoming out, with slippages and credit costs moderating in Q2 and CE in MFI business showing further improvement. This provides confidence that credit costs will remain within the 1% as per FY26 guidance and trend toward the long-term 75-85bp range thereafter. The RBI’s in-principle nod for the universal bank license is a remarkable milestone and will meaningfully enhance brand trust, unlock broader deposit pools, improve CoF, and accelerate cross-selling across wealth, insurance, forex and payments. With the cost of funds already declining and NIMs expected to expand over the coming quarters, the margin trajectory appears constructive.We model ~23-24% loan CAGR over FY26-28, supported by strong secured growth engines (VF, mortgages, gold, commercial banking) and normalization in MFI and cards. This, coupled with improving cost efficiency and rising fee income, should drive 34% earnings CAGR over FY26-28E. Notwithstanding the strong rally in the stock price, we remain excited about AU Small Finance’s growth and earnings prospects and reiterate it as our preferred Buy in the mid-size banking space. We revise our target price to Rs 1,100 (premised on 3.3x Sep’27E book-value)..Click on the attachment to read the full report:.Poonawalla Fincorp Shares Can Rally 28% Says Motilal Oswal, Maintaining 'Buy' — Check Target Price.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Motilal Oswal Maintains 'Buy' On AU Small Finance Bank, Revises Target Price — Check Details

Notwithstanding the strong rally in the stock price, the brokergae remains excited about AU SFB’s growth and earnings prospects and reiterate it as preferred Buy in the mid-size banking space.

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