Ujjivan Small Finance Bank continues to witness a remarkable rally, with its stock surging over 8% to reach a fresh 52-week high of Rs 52.25 on the NSE. This impressive run comes after the bank reported robust earnings for the June quarter, posting a 60% year-on-year (YoY) rise in net profit, which amounted to Rs 324 crores.
The market has responded positively to the bank's strong performance, driving its stock price up by 22% in just six trading sessions. The rally is well-supported by substantial trading volumes, with over 3.66 crore shares changing hands on the NSE by 10:40 am.
Key highlights from Ujjivan's Q1 results include a 32% YoY increase in net interest income to Rs 793 crore, despite a 40 basis point decrease in net interest margin, which was attributed to the lagged effect of the rise in deposit rates.
The bank's asset quality has shown significant improvement, with gross non-performing assets (NPA) at 2.4%, down from 5.9% a year ago. Furthermore, the net NPA ratio stood at a commendable 0.06% for the quarter.
Ujjivan Small Finance Bank has also managed to strengthen its deposit base, which grew by an impressive 45% YoY to reach Rs 26,660 crore. The ratio of current and savings accounts (CASA) to total deposits also witnessed a notable increase, rising to 24.6% by the end of the reporting period, showcasing the bank's focus on garnering low-cost funds.
Buoyed by the encouraging Q1 results, leading brokerages have recommended a 'Buy' stance on Ujjivan's stock. Emkay has retained its buy rating with a target price of Rs 58, while HDFC Securities has an 'Add' recommendation with a target of Rs 50. ICICI Securities has displayed the highest optimism, setting the target price at Rs 60.
ICICI Securities also praised Ujjivan Small Finance Bank's strong profitability and industry-leading position within the Small Finance Bank (SFB) space. The bank has sustained a return on assets (ROA) of over 3.5% for the fourth consecutive quarter, with an average return on equity (RoE) of 30% during the same period. Despite credit costs normalizing to 40 basis points in Q1FY24, the bank's profitability remains robust, underlining its strong underlying business momentum.
As the bank continues to showcase its growth trajectory and maintain its solid performance in a challenging economic environment, investors and analysts are closely monitoring its potential for further growth and value appreciation in the market.
