Q4FY18 RESULT UPDATE RETAIL EQUITY RESEARCH Ujjivan Financial Services Ltd Banking/Finance BSE CODE:539874 NSE CODE:UJJIVAN Bloomberg CODE: UJJIVABN: IN SENSEX: 35,536 BUY Rating as per Midcap 12 Months investment Period CMP Rs.407 TARGET Rs.470 RETURN 16% 14 th May 2018 Strong performance. Ujjivan Small Finance Bank serves over 37.1 lakh active customers through 464 branches and 11,242 employees spread across 209 districts and 24 states in India with Gross Loan Book stands at Rs.7,560cr and it has over 187 full-service banking outlets with a deposit base of Rs.3,772 cr. Net Interest Income grew by strong 64.4% on the back of 18.5% growth in advances YoY. PAT was at Rs.65cr against 19cr in Q4FY17 which grew by 235% YoY mainly on account of reduction in cost of funds. NIM has improved by strong 300bps to 11.6% against 8.6% in Q4FY17 mainly resulted from 140bps improvement in cost of funds. GNPA improved to 3.6% and NNPA to 0.7% in Q4FY18 against 4.2% and 1.0% respectively in Q3 FY18. Deposit grew by 55% QoQ on account of newly added full- fledged bank branches (66 in Q4FY18) With long term outlook remaining positive on back of steady loan growth and improvement in earnings, we value at 2.7x FY20 Adj. BV and upgrade our recommendation to BUY with a revised target price of Rs470 Earnings gaining momentum The PAT is reported at Rs.64.9cr in Q4FY18 against Rs.19.4cr in the same quarter on account of lower credit cost. NIM is higher at 11.6% in Q4FY18 as compared to 8.6% in Q4FY17 which is primarily due to reduction in finance cost attained through mobilizing low cost deposits. The total cost of funds have reduced by 140bps to 9% as on Q4FY18 from 10.4% in Q4FY17. We expect 13% CAGR in NII and 25% CAGR in loan book over FY18-20E. Improving loan growth Advances and deposits grew by 18.5%/55% YoY in Q4FY18. Contribution of deposits increased from 35% in Q3FY18 to 49% in Q4FY18 towards the total fund and resulted in reduction of borrowing costs. Loan disbursements grew by strong 60.8% YoY with fresh disbursement growing by 33% YoY led by strong growth in Micro and Small Enterprises (grew by 300%), Housing Finance (grew by 226%) and Group loan (grew by 17%). Out of 464 branches, 187 branches are converted into full-fledged bank branches (added 66 branches in Q4FY18) which would help to mobilise low cost deposits going forward. Better asset quality GNPA improved to 3.6% and NNPA to 0.7% in Q4FY18 against 4.2% and 1.0% respectively in Q3FY18 which is indicating continuous improvement in asset quality. The new business has been maintaining a collection efficiency of 99.7% since January 2017 which would help to reduce fresh slippages going forward. Valuations Long term outlook remain positive on the back of strong earnings coupled with healthy loan growth. We value at 2.7x FY20 Adj. BV and recommend BUY rating with a revised target price of Rs.470. Company Data Market Cap (cr) Rs. 4,926 Outstanding Shares (cr) 12.1 Free Float 100% Dividend Yield 0.2 52 week high Rs. 432 52 week low Rs. 285 6m average volume (cr) 0.15 Beta 1.4 Face value Rs10 Shareholding (%) Q2FY18 Q3FY18 Q4FY18 Promoters 0 0 0 FII s 42.1 40.4 42.3 MFs/Insti 14.5 15.6 14.2 Public 28.9 29.9 29.1 Others 14.5 14.1 14.4 Total 100 100 100 Price Performance 3month 6month 1 Year Absolute Return 10.7% 8.8% 13.5% Absolute Sensex 4.5% 7.6% 17.5% Relative Return 6.2% 1.2% -3.9% *over or under performance to benchmark index 500 425 350 275 Ujjivan Sensex Rebased 200 May 17 Sep 17 Jan 18 May 18 Standalone(Rs.cr) FY18A FY19E FY20E NII 839 1,007 1,247 Growth (%) 23 20 23 NIM (%) 10.6 10.0 9.8 PAT Adj 7.3 254 264 Growth (%) -96 3390 3.9 Adj.EPS 0.6 21 21.8 Growth (%) -95 3390 3.9 P/E 671 19.2 18.5 P/B 2.8 2.4 2.2 Adj. P/B 3.0 2.6 2.3 ROE % 0.4 13.5 12.3 Sreenish S R Analyst
Quarterly Financials Profit & Loss Account (Rscr) Q4FY18 Q4FY17 YoY Growth % Q3FY18 QoQ Growth % Interest Income 423 315 34 358 18 Interest Expense 153 162-5 141 8 Net Interest Income (NII) 270 153 76 217 24 Fee and Other Income 38 25 50 26 47 Total Income 308 178 73 243 27 Expenditure 163 131 24 156 4 Provision 35 7 384 29 21 Depreciation 12 5 139 11 10.2 Other Income - - - PBT 98 35 183 47 110 Tax 33 15 116 17 90 Reported PAT 65 19.4 235 29 121 Adjustment - - - - Adjusted PAT 65 19.4 235 29 121 Diluted EPS (Rs) 5.4 1.6 238 2.4 125 Change in estimates Old estimates New estimates Change % Year / Rscr FY19E FY20E FY19E FY20E FY19E FY20E Net Interest Income (NII) 934-1,007 1,243 +7.8 - NIM (%) 8.4-10 9.8 +160bps - Fee and Other Income 217-221 354 +1.8 - Adj PAT 225-254 264 +12.8 - Diluted EPS (Rs) 19-21 22 +10.5 -
Standalone Financials Profit & Loss Account Ratios Y.E March (Rscr) FY16 FY17 FY18 FY19E FY20E Interest Income 931 1,226 1,443 1,852 2,344 Interest Expense 423 543 605 845 1,101 Net Int. Income 507 683 839 1,007 1,243 % Change 82 35 23 20 23 Non Int. Income 76 124 138 221 354 Operating 584 807 977 1,229 1,597 Income % Change 78 38.2 33.6 25.8 30.0 Pre Prov. Profit 277 349 323 549 624 Prov. &Conting. 25 75 311 169 215 PBT 272 322 12 380 409 % Change 138 18-95 3103 8 Tax 95 114 5 126 145 Tax Rate (%) 35 35 34 34 34 Reported PAT 177 208 7 254 264 Adj* 0 0 0 0 0 Adj PAT 177 208 7 254 264 % change 133.8 17.2-94.5 3389 3.9 No. of shares (cr) 10 12 12 12 12 EPS (Rs) 17.5 17.4 0.6 21.0 21.8 % change 133.8-36.7-94.6 3389.7-36.7 DPS (Rs) 0.8 0.6 0.0 0.6 0.6 CEPS (Rs) 18.3 18.3 12.1 4.0 24.6 Y.E March FY16 FY17 FY18 FY19E FY20E Profitability & Return Ratios Interest yield (%) 23.0 19.8 17.9 18.5 18.5 Cost of funds (%) 11.4 10.6 8.5 8.4 8.3 Net int. spread (%) 11.6 9.2 9.4 10.1 10.2 NIM (%) 12.3 12.5 10.4 10.0 9.8 ROE (%) 18.3 9.0 0.4 13.5 12.3 ROA (%) 3.5 1.5 0.1 2.1 1.7 Asset Quality GNPA (%) 0.15 3.69 3.60 3.50 3.50 NNPA (%) 0.04 0.03 0.70 1.00 1.20 Credit cost (%) 0.5 1.2 4.4 1.8 1.8 Valuation ratios P/E (x) 23.2 36.7 675.9 19.4 18.6 P/BV (x) 3.4 2.8 2.8 2.4 2.2 P/ABV (x) 3.4 2.8 3.0 2.6 2.3 Balance Sheet Y.E March (Rscr) FY16 FY17 FY18 FY19E FY20E Cash and cash eq 491 760 594 1,621 1,942 Loans &Advances 5,129 6,017 7,626 9,938 12,417 Investments 0 1,447 1,232 1,432 1,732 Current assets 59 68 87 119 155 Gross fixed assets 36 100 240 375 511 Net fixed assets 17 76 198 266 340 Intangible assets 7 64 0 0 0 Def. Tax (Net) 24 47 77 65 53 Other Assets Total assets 5,727 8,479 9,814 13,442 16,639 Deposits 0 106 3,797 7,076 8,845 Debt funds 1,734 2,839 3,853 3,774 4,717 Other liabilities 2,720 3,630 117 129 141 Provisions 76 147 286 455 670 Equity capital 101 119 121 121 121 Reserves& Surplus 1,097 1,636 1,640 1,887 2,144 Shareholder's 1,198 1,756 1,762 2,009 2,266 fund Total liabilities 5,727 8,479 9,814 13,442 16,639 BVPS (Rs) 118.4 147.1 145.7 166.2 187.4 % Change 38.4 24.3-0.9 14.0 12.8 Adj. BVPS 118.6 147.2 136.3 155.6 174.2
Recommendation Summary (last 3 years) Dates Rating Target 600 500 400 16-March-2017 09-August-2017 15-February-2018 Accumulate 520 391 413 11-May-2017 07-November-2017 14-May-2018 415 426 470 300 200 100 0 May-16 Nov-16 May-17 Nov-17 May-18 Source: Bloomberg, Geojit Research Investment Rating Criteria Large Cap Stocks; - Upside is above 10%. Hold - Upside is between 0% - 10%. Reduce - Downside is more than 0%. Neutral - Not Applicable Mid Cap and Small Cap; - Upside is above 15% Accumulate - Upside is between 10% - 15%. Hold - Upside is between 0% - 10%. Reduce/Sell - Downside is more than 0%. Neutral - Not Applicable To satisfy regulatory requirements, we attribute Accumulate as and Reduce as Sell. The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being upgraded to BUY or downgraded to a HOLD, REDUCE or SELL. Neutral- The analyst has no investment opinion on the stock under review. General Disclosures and Disclaimers CERTIFICATION I, Sreenish S R, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject issuer or securities. This report has been prepared by the Research Team of GeojitFinancial Services Limited, hereinafter referred to as Geojit. COMPANY OVERVIEW Geojit Financial Services Limited (hereinafter Geojit), a publically listed company, is engaged in services of retail broking, depository services, portfolio management and marketing investment products including mutual funds, insurance and properties. 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