Buy Ujjivan Small Finance Bank; target of Rs 60: Emkay Global Financial

Emkay Global Financial' research report on Ujjivan Small Finance Bank

Ujjivan SFB hosted an analyst meet to present its long-term strategic plan encompassing ambitious growth over FY26-30E – 3x FY25 GLP at Rs1trn with 65-70% of the portfolio being secured and to still deliver sustained healthy RoA of 1.8-2%, mainly aided by better operational efficiency (C/A ratio less than 5% vs more than 6% now) and credit cost (~1-1.5% from over 2%). The mgmt claims that this strategic plan is Universal-bank-license-agnostic and expects to secure the license by Dec-25. However, we believe scaling up liability is a major challenge (targets 35% by FY30 vs 24% now) as an SFB, which should receive some boost by the ‘Universal Bank’ tag. Near term, the bank remains focused on managing asset quality, which it expects to gradually improve, and aims to be more visible from 2H. We trim our earnings estimate by 5-9%, building in some margin moderation/higher opex in the interim, though we expect Ujjivan to deliver 1.7-2% RoA over FY27-28E (from 1.3% in FY26E) led by MFI recovery.

Outlook

With the stock trading at 1.1x Sep-27E ABV—well below AU SFB’s 2.1x (which recently secured a Universal Bank license)—we believe it could re-rate as MFI recovery gathers steam, coupled with a Universal Bank license. We retain BUY and TP of Rs60 (rolling forward on 1.5x Sep-27E ABV).

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Ujjivan Small Finance Bank - 09092025 - icici