Motilal Oswal, a brokerage firm, has recommended a buy rating on Equitas Small Finance Bank shares. In its research report dated June 23, 2023, the firm is bullish on the stock, setting a target price of Rs 105. Motilal Oswal expects the bank’s asset quality to improve, making it a favorable investment option.
Stocks to Buy: Motilal Oswal, a brokerage firm, recommends investing in Equitas Small Finance Bank, a mid-cap share in the banking sector. This stock has doubled investors’ wealth in the past year. With a strong growth outlook, this share is poised to generate impressive profits for investors. The stock is continuously being re-rated due to its robust growth. The brokerage firm expects further improvement in the bank’s asset quality. On June 26, 2023, Equitas Small Finance Bank’s share closed at ₹85, rising by 3.6%.
Share Expected to Touch ₹105 Level
Motilal Oswal suggests buying shares of Equitas Small Finance Bank (EQUITASB) and sets a target price of ₹105 per share. Based on the current price, investors could potentially earn a remarkable return of around 23-24%. This small finance bank has delivered exceptional returns over the past year. Within one year (until June 26), the share price has surged by over 115%. This means that a ₹100,000 investment in this share in June 2022 is now worth more than ₹200,000. The company’s market capitalization on BSE stands at ₹9,462.47 crores.
Brokerage’s Opinion
Motilal Oswal believes that Equitas Small Finance Bank’s asset quality will improve. The estimated return on assets (RoA) is expected to exceed 2%. The bank recorded substantial profits in FY23, supported by strong margins, healthy loan growth, and controlled credit costs.
The brokerage suggests that the bank’s focus is on a diversified loan book. It expects good growth from small business loans, as well as auto loans, microfinance, and housing finance segments. This could result in a 27% CAGR in loans during FY23-25. The bank’s franchise model is experiencing robust growth. The GNPA/NNPA ratio improved to 2.8%/1.2% by 4QFY23. By FY25, the Provision Coverage Ratio (PCR) could increase to 70%. It is estimated that the bank could achieve a RoA/RoE of 2.1%/16.7% during FY25.
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