Hold Utkarsh SFB., target price Rs 26: ICICI Securities
ICICI Securities has a hold call on Utkarsh Small Finance Bank with a target price of Rs 26.The current market price of Utkarsh Small Finance Bank is Rs 27.1. Utkarsh Small Finance Bank, incorporated in 2016, is a banking company with a market cap of Rs 2970.82 crore.
Utkarsh SFB, key products/revenue segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2024.
Financials For the quarter ended 31-12-2024, the company has reported a Standalone Total Income of Rs 1037.92 crore, down -4.74% from last quarter Total Income of Rs 1089.54 crore and up 16.80% from last year same quarter Total Income of Rs 888.64 crore. The bank has reported net profit after tax of Rs -168.05 crore in the latest quarter.
Investment Rationale
Prolonged stress in Utkarsh SFB?s microfinance portfolio marred Q3FY25 earnings (net loss at Rs 1.68 billion) and may result in elevated credit cost in Q4 as well. However, X-bucket collection efficiency touching 99% in Feb'25 vs 98.5% in Jan?25 vs 98% in Dec'24 indicates subsiding stress in the MFI segment. Credit cost in Q3 remained elevated at 9% (annualised) vs 4.4% QoQ. Further, elevated stress pool with SMA 1-2 at 5.6% and PCR at 61% as on Dec?24 would keep credit cost higher in Q4FY25-Q1FY26E. Given near-term profitability may remain under pressure and business could normalise by Q2FY26, ICICI Securities maintains a HOLD rating with a revised target price of Rs 26 (earlier:
