Ujjivan SFB share price target at Rs 50? Here's what analysts say on multibagger stock

Analysts attending Ujjivan Small Finance Bank’s analyst meet said the bank remained confident about its growth outlook and feels the share of secured segment to increase gradually. The management, they said, is aspiring for an overall asset base growth of 25 per cent in FY24 with secured book likely to cross 30 per cent. In addition, Ujjivan SFB is targeting a 35 per cent CASA mix with a 70 per cent share of retail deposits while growing deposits at 30 per cent-plus compounded annually over the next three years.

Analysts said asset quality is not a concern for the SFB for now, as a few of them suggested a 'Buy' rating on the stock despite a 140 per cent surge in the last one year. Their price targets suggest neutral-to-positive view on the stock, with upside target of up to 33 per cent.

Ujjivan SFB’s valuation remains undemanding at 6 times earnings per share and 1.1 times price-to-adjusted book value on FY25 estimates, YES Securities said. A rising conviction on the growth and return on equity (ROE) delivery and book value benefit from reverse merger would further re-rate the stock over the coming 6-12 months, it said while raising its 12-month price target to Rs 50 on the stock.

"We believe Ujjivan SFB is a key beneficiary of the upswing in the microfinance sector. Incremental rerating will be contingent on consistent growth and profitability delivery across product segments along with continued improvement in the liabilities franchise. Current valuations are inexpensive given return ratios of 3.2 per cent (ROA) and 26.4 per cent (ROE) for FY25," said JM Financial while suggesting a target of Rs 38 on the stock.

Post a strong recovery in FY23, Ujjivan SFB is looking to capitalise on the growth opportunities with building blocks in place, said Axis Securities. With asset quality challenges behind, the focus will now remain on sustaining growth momentum and improving efficiency, it added.

"As the secured non-MFI book begins to contribute meaningfully to overall portfolio growth, NIM pressures will be visible. However, the bank remains well poised to deliver robust RoA/RoE despite margin compression and elevated cost ratios. The reverse merger is in the final stages and should be BVPS accretive (BVPS expected to increase 7-8 per cent)," Axis Securities said.

In 2015, the RBI gave banking licence to 10 SFBs. Since, Ujjivan got license to turned into SFB, it made upfront investment in branches, teams, technology over FY17-20. As of FY23, the bank had gross loan book of Rs 24,000 crore and disbursement of Rs 20,000 crore, garnering deposits of Rs 25,000 crore with focus on building granular retail deposits, analysts noted.

Despite the sharp run-up in the stock, Axis Securities believes stock's valuations of 1.3 times Sep’24E adjusted book value are attractive for a potential RoA of 2.5-2.7 per cent and ROE of 23-24 per cent over FY24-25E. It has a target of Rs 45 on the stock. Kotak Institutional Equities finds the stock worth Rs 42. Haitong International sees the stock at Rs 38.

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