Goal: ₹45
CMP: ₹32.40
Profitable scale-up of retail (secured) portfolio and calibrated development in microfinance (13 per cent y-o-y development in FY24) helped Ujjivan Small Finance Financial institution (Ujjivan) in delivering higher than trade profitability. Its RoA at about 1 per cent (regardless of PAT falling by >50 per cent q-o-q to ₹100 crore) is more likely to be highest amongst MFI gamers.
Earnings, throughout Q3FY25, had been impacted by an 8 per cent q-o-q decline in its MFI e book, 6 per cent fall in NII and round 3 per cent rise in credit score value vs. 2 per cent q-o-q . Nonetheless, Ujjivan’s secured retail e book grew a sturdy 12 per cent q-o-q; contributes round 40 per cent of complete loans, as on Dec’24.
Ujjvan’s asset high quality efficiency in its MFI e book is best than trade; therefore, we consider it could maintain >14% RoE in FY26–27.
We improve Ujjivan to Purchase (earlier Maintain) with a revised TP of ₹45 (earlier ₹36), valuing it at 1.25x (1x earlier) on Sep’25E BVPS.
Key dangers: Decrease-than-expected slippages and credit score value, notably from the microfinance portfolio, thereby, impacting credit score value; and Slower-than-expected mortgage development, notably resulting from decrease development in unsecured portfolio.
