Ujjivan Small Finance Bank - Strong Business Momentum To Continue: Geojit
Enhanced profitability aided by healthy credit growth and lower cost.
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Geojit Research Report
Ujjivan Small Finance Bank Ltd., a wholly owned subsidiary of Ujjivan Financial Services Ltd., serves over 76 lakh customers through 661 branches. Ujjivan Financial Services is the third largest SFB with a loan book size of Rs 25,326 crore and a deposit base of Rs 26,660 crore.
Investment thesis
Advance growth is expected to remain strong at 25%, led by both microfinance and non-micro finance book with strong customer addition and brand building strategies.
Considering strong loan growth, an improving cost to income ratio and lower credit costs, Ujjivan Financial Services is expected to record an return on equity of 25% in FY24 and 23% in FY25, well above the management guidance.
The proposed reverse merger with the parent company is expected to be completed within 2024.
Asset quality continues to witness improvement, with gross/net non-performing asset declining to 2.40%%/0.06%, respectively.
Considering the strong business performance, we upgrade our rating to 'Buy' based on 1.8 times FY25E adjusted book value per share with a target price of Rs 62.
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