Ujjivan SFB shares get unanimous Buy calls

Ujjivan Small Finance Bank Ltd has received 13 analyst recommendations following its strong June quarter results and an upward revision to its FY27 return on assets guidance. All the recommendations are either ‘Buy’ or ‘Outperform’, with no ‘Hold’ or ‘Sell’ ratings.

The stock has a consensus target of Rs 80.65, implying about 17 per cent upside from current levels, despite Thursday’s rally. Investec, Nuvama and ICICI Securities have assigned the highest target of Rs 90 each, suggesting up to 31 per cent upside for the SFB stock.

JM Financial said a guidance upgrade just one quarter into the financial year is unusual and, in its view, credible. The brokerage noted that Ujjivan SFB’s return on assets already exceeds the upper end of the revised guidance band, credit costs have normalised faster than expected, and the secured loan mix has crossed 50 per cent without hurting margins.

It maintained its ‘Buy’ rating on the stock and raised its target price to Rs 82 from Rs 75, valuing the bank at 1.6 times FY28 estimated PBV. June was another quarter of robust performance by Ujjivan SFB, driven by strong credit growth, healthy margins and improving asset quality.

Factoring the Q1 beat and management guidance, Nuvama raised its FY27–28 return on asset for the SFB to 2 per cent, which could moderate slightly as the non-MFI book scales up. This brokerage said Ujjivan SFB’s Q1 was led by strong credit growth of 29.2 per cent YoY, high and stable net interest margin of 8.5 per cent and improving asset quality.

For FY27, the management has upped return on asset guidance to 1.8–2 per cent from 1.6 per cent as it gained confidence on steady improvement in credit cost and opex. SBI Securities said Ujjivan’s strong quarterly result were underpinned by robust business growth, stable margins, lower-than-expected opex growth and asset quality improvement.

Asset quality continued to witness meaningful improvement with stabilization in the micro-banking portfolio across states. Microbanking loan book witnessed healthy demand during the quarter across IL and GL book. The bank has revised FY27 return on asset guidance upwards, driven by lower opex and credit costs.

On Friday, the scrip was trading at Rs 69.19 apiece, up 0.52 per cent, a day after rallying 5.73 per cent. Even the lowest target on the stock by Haitong International, so far, stood at Rs 76, which suggested a 10 per cent upside over Thursday’s closing price.

Ujjivan SFB is a small finance bank.