AU Small Finance Bank (AU SFB) shares rallied nearly 5% in recent trading, reaching an intraday high of Rs 1,051.45 on the BSE. This surge followed the lender's announcement of another strong June quarter, characterized by healthy business momentum across both advances and deposits.
The quarter showcased robust balance sheet growth, sustained net interest margins (NIM), improving profitability, and continued normalization in asset quality. This performance has led to a wide range of revised target prices from various brokerages.
Brokerage Targets Range Widely
Among the 25 brokerages that updated their target prices after the June quarter results, MOFSL holds the highest target for AU SFB shares at Rs 1,275. Conversely, BNP Paribas has set the lowest target at Rs 800.
Centrum Broking highlighted AU SFB's 37% year-on-year profit growth for the quarter, reaching Rs 796 crore. This was supported by a 23% increase in loan growth and a 24% rise in deposits. The brokerage noted that NIM remained robust at 5.9%, despite a moderating rate environment. Centrum recommended a 'Buy' rating with a target of Rs 1,004, acknowledging continued investments in technology, manpower, and distribution that kept operating expenses elevated but position the bank for future operating leverage.
Insights from Other Financial Analysts
- Ashika Stock Broking views AU SFB as a compelling structural growth story, underpinned by its diversified lending franchise, strong liability mobilization, and tech-led execution. They maintain a 'Buy' rating with a target price of Rs 1,195, anticipating the impending transition to a Universal Bank as a key catalyst to lower the cost of funds and enhance fee income.
- Equirus Securities expects AU SFB to sustain current NIMs, despite concerns over potential asset-quality stress in vehicle finance. They reiterated an 'ADD' rating with a March 2027 target of Rs 1,145.
- JM Financial upgraded its rating to 'BUY' from 'ADD', revising its target to Rs 1,165 (up from Rs 1,100). They believe the universal bank transition remains a crucial structural growth driver, justifying the bank's premium valuation.
- ICICI Securities also suggested a 'Buy' on AU SFB, setting a target of Rs 1,250, citing strong Q1 performance, strengthening asset quality, and sustained credit momentum.
However, not all brokerages share an optimistic outlook. Kotak and Ambit Capital have suggested 'Sell' ratings, with targets of Rs 925 and Rs 900, respectively. Nomura and UBS are 'Neutral' on the stock, with targets of Rs 1,180 and Rs 1,150.
Other notable targets include Jefferies and Investec at Rs 1,270, JPMorgan at Rs 1,230, and Morgan Stanley at Rs 1,205. The Bloomberg consensus target on the stock currently stands at Rs 1,039.40, suggesting limited immediate upside potential from current levels.