COMPANY UPDATE RETAIL EQUITY RESEARCH Ujjivan Financial Services Ltd Banking/Finance BSE CODE:539874 NSE CODE:UJJIVAN Bloomberg CODE: UJJIVABN: IN SENSEX: 38,313 Accumulate Rating as per Midcap 12 Months investment Period CMP Rs.352 TARGET Rs.399 RETURN 13% 4 th September 2018 Strong operating performance. Ujjivan Small Finance Bank serves over 37 lakh active customers through 462 branches and 12,300 employees spread across 214 districts and 24 states in India with Gross Loan Book stands at Rs7,800cr. It has over 275 full-service banking outlets with a deposit base of Rs3,800cr. Net Interest Income grew by strong 61% on the back of 21% growth in advances YoY. Net profit of Rs45cr in Q1FY19 against Net loss of Rs75cr reported in Q1FY18 mainly on account of lower provisioning. NIM has improved by strong 240bps to 11.6% against 9.2% in Q1FY18 primarily due to 120bps improvement in cost of funds. GNPA improved to 2.7% and NNPA to 0.3% in Q1FY19 against 6.2% and 2.3% respectively in Q1 FY18. Deposit reached Rs3803cr in Q1FY19 from Rs404cr in Q1FY18 which grew by 841% YoY. With long term outlook remaining positive on back of steady loan growth and strong improvement in earnings, we value at 2.2x FY20 Adj. BV and recommend to Accumulate with a revised target price of Rs399 Strong Earnings growth Net interest income witnessed a stupendous growth of 61% in Q1FY19 to Rs222cr against Rs138cr in Q1FY18 mainly reflected due to 21% growth in advances. The PAT is reported at Rs45cr in Q1FY19 against a loss of Rs75cr in Q1FY18 the same quarter led by lower provisioning. NIM is higher at 11.6% in Q1FY19 as compared to 9.2% in Q1FY18 which is primarily due to reduction in finance cost attained through mobilizing low cost deposits. The total cost of funds have reduced by 120bps to 8.6% as on Q1FY19 from 9.8% in Q1FY18. We expect 33% CAGR in NII and 20% CAGR in loan book over FY18-20E. Maintaining loan growth Advances and deposits grew by 21%/841% YoY in Q1FY19. Contribution of deposits increased from 6% in Q1FY18 to 49% in Q1FY19 towards the total fund and resulted in reduction of borrowing costs. Deposit grew mainly on account of newly added full-fledged bank branches which stood at 275 in Q1FY19 against 187 branches in the last quarter. Loan disbursements grew by strong 23% YoY. Out of 462 branches, 275 branches are converted into full-fledged bank branches (added 88 branches in Q1FY19) which would help to mobilise low cost deposits going forward. Better asset quality GNPA improved to 2.7% and NNPA to 0.3% in Q1FY19 against 6.2% and 2.3% respectively in Q1FY19 which is indicating continuous improvement in asset quality which resulted 130% reduction in provisioning. Valuations Long term outlook remain positive on the back of strong earnings coupled with healthy loan growth. We value at 2.2x FY20 Adj. BV and recommend to Accumulate with a revised target price of Rs399. Company Data Market Cap (cr) Rs.4,258 Outstanding Shares (cr) 12.1 Free Float 100% Dividend Yield 0.2 52 week high Rs.432 52 week low Rs.314 6m average volume (cr) 0.12 Beta 1.3 Face value Rs.10 Shareholding (%) Q3FY18 Q4FY18 Q1FY19 Promoters 0 0 0 FII s 40.4 42.3 42.1 MFs/Insti 15.6 14.2 14.4 Public 29.9 29.1 29.3 Others 14.1 14.4 14.2 Total 100 100 100 Price Performance 3month 6month 1 Year Absolute Return -10.4% -3.2% -1.5% Absolute Sensex 9.8% 14.6% 22.3% Relative Return -20.3% -17.9% -23.8% *over or under performance to benchmark index 500 425 350 275 Ujjivan Sensex Rebased 200 Aug 17 Nov 17 Feb 18 May 18 Aug 18 Standalone(Rs.cr) FY18A FY19E FY20E NII 707 1,047 1,250 Growth (%) 3 48 19 NIM (%) 8.8 10.9 10.8 PAT Adj 7.3 232 269 Growth (%) -97 3089 15.7 Adj.EPS 0.6 19.2 22.2 Growth (%) -97 3089 15.7 P/E 584 18.3 15.8 P/B 2.4 2.1 1.8 Adj. P/B 2.5 2.2 1.9 ROE % 0.4 12.4 12.7 Sreenish S R Analyst
Quarterly Financials Profit & Loss Account (Rscr) Q1FY19 Q1FY18 YoY Growth % Q4FY18 QoQ Growth % Interest Income 404 323 25 423-4 Interest Expense 162 157 3 153 6 Net Interest Income (NII) 242 166 46 270-10 Fee and Other Income 58 35 66 38 53 Total Income 300 201 49 308-3 Expenditure 205 149 38 163 26 Provision 15 159-91 35-57 Depreciation 12 8 50 12 0 Other Income 0 35 - - - PBT 68 (80) 185 98-31 Tax 23 (40) 158 33-30 Reported PAT 45 (40) 213 65-31 Adjustment - - - - - Adjusted PAT 45 (40) 213 65-31 Diluted EPS (Rs) 3.7 (3.3) 212 5.4-31 Change in estimates Old estimates New estimates Change % Year / Rscr FY19E FY20E FY19E FY20E FY19E FY20E Net Interest Income (NII) 1,007 1,243 1,047 1,250 +4.3 +0.6 NIM (%) 10 9.8 10.9 10.8 90bps 100bps Fee and Other Income 221 354 209 313-5.4-11.6 Adj PAT 254 264 232 269-8.7 +1.9 Diluted EPS (Rs) 21 22 19.2 22.2-8.6 +1.8
Standalone Financials Profit & Loss Account Ratios Y.E March (Rscr) FY16 FY17 FY18 FY19E FY20E Interest Income 931 1,226 1,312 1,746 2,078 Interest Expense 423 543 605 699 828 Net Int. Income 507 683 707 1,047 1,250 % Change 82 35 3 48 19 Non Int. Income 76 124 132 209 313 Operating 584 807 838 1,256 1,563 Income % Change 78 38.2 3.9 49.8 24.4 Pre Prov. Profit 277 349 184 340 386 Prov. &Conting. 25 75 311 108 118 PBT 272 322 12 370 426 % Change 138 18-96 3029 15 Tax 95 114 5 138 158 Tax Rate (%) 35 35 38 38% 38% Reported PAT 177 208 7 232 269 Adj* 0 0 0 0 0 Adj PAT 177 208 7.3 232 269 % change 133.8 17.2-96.5 3089.0 15.7 No. of shares (cr) 10 12 12 12 12 EPS (Rs) 17.5 17.4 0.6 19.2 22.23 % change 133.8-36.7-96.5 3089.0 15.7 DPS (Rs) 0.8 0.6 0.0 0.6 0.6 CEPS (Rs) 18.3 18.3 4.0 23.9 27.8 Y.E March FY16 FY17 FY18 FY19E FY20E Profitability & Return Ratios Interest yield (%) 23.0 19.8 16.3 18.1 18.0 Cost of funds (%) 11.4 10.6 9.0 8.5 8.6 Net int. spread 11.6 9.2 7.3 9.6 9.4 (%) NIM (%) 12.3 11.0 8.8 10.9 10.8 ROE (%) 18.3 14.1 0.4 68.4 71.0 ROA (%) 3.5 2.6-0.2 12.4 12.7 Asset Quality GNPA (%) 0.15 3.69 3.60 2.70 2.70 NNPA (%) 0.04 0.03 0.70 0.30 0.50 Credit cost (%) 0.6 1.3 4.3 1.3 1.1 Loan growth 58 17 28 20 20 Valuation ratios P/E (x) 20.1 20.2 584.3 18.3 15.8 P/BV (x) 3.0 2.4 2.4 2.1 1.8 P/ABV (x) 3.0 2.4 2.5 2.2 1.9 Balance Sheet Y.E March (Rscr) FY16 FY17 FY18 FY19E FY20E Cash and cash eq 491 760 594 3,859 3,917 Loans &Advances 5,129 5,977 7,626 9,155 10,967 Investments 0 1,448 1,233 1,433 1,733 Current assets 59 78 87 112 138 Gross fixed assets 36 100 168 243 328 Net fixed assets 17 75 123 156 190 Intangible assets 7 64 76 60 45 Def. Tax (Net) 24 47 76 65 52 Total assets 5,727 8,450 9,814 14,840 17,041 Deposits 0 106 244 5,353 6,263 Debt funds 1,734 2,839 3,657 2,855 3,340 Other liabilities 2,720 3,727 3,865 4,251 4,676 Provisions 76 51 286 394 512 Equity capital 101 119 121 121 121 Reserves& 1,097 1,636 1,640 1,866 2,127 Surplus Shareholder's 1,198 1,756 1,762 1,987 2,249 fund Total liabilities 5,727 8,479 9,814 14,840 17,041 BVPS (Rs) 118.4 147.0 145.7 164.4 186. % Change 38.4% 24.2% -0.9% 12.8% 13.2% Adj. BVPS 118.6 147.2 141.4 162.1 181.5
Recommendation Summary (last 3 years) Dates Rating Target 16-March-2017 Buy 520 11-May-2017 Buy 415 09-August-2017 Buy 391 07-November-2017 Buy 426 15-February-2018 Accumulate 413 14-May-2018 Buy 470 4-September-2018 Accumulate 399 Source: Bloomberg, Geojit Research Investment Rating Criteria Large Cap Stocks; Buy - Upside is above 10%. Hold - Upside is between 0% - 10%. Reduce - Downside is more than 0%. Neutral - Not Applicable Mid Cap and Small Cap; Buy - 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 Buy 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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