#Ujjivan Small Finance Bank
**Ujjivan Small Finance Bank: Investment Rationale**
**Current Market Price (CMP):** ₹40
**Recommended Buying Strategy:**
- **Phase 1:** Buy between ₹40 and ₹38
- **Phase 2:** Buy between ₹30 and ₹26
**Short-Term Targets:** ₹32, ₹37, ₹40+
**Positional Targets:** ₹40, ₹48, ₹55, ₹72, ₹100+
**Key Investment Highlights:**
- **Robust Loan Book Growth:** The gross loan book increased by 19% year-over-year (YoY), reaching ₹30,069 crore by Q1 FY25. This growth is driven by strong demand in the affordable housing (42% YoY) and financial institution lending segments (48% YoY).
- **Strong Deposit Base:** Total deposits grew by 22% YoY to ₹32,514 crore, with retail deposits comprising 74% of the total. A high proportion of retail deposits indicates a stable and granular funding base, potentially reducing the cost of funds and enhancing profitability.
- **Improving Asset Quality:** The bank has shown strong asset quality management, with Gross Non-Performing Assets (GNPA) decreasing to 2.3% from 2.4% YoY, and Net NPA reducing to 0.4%. This reflects the bank's effective recovery processes and low default rates.
- **Profitability and Return on Equity (RoE):** Despite a 7% YoY decline in Q1 FY25 net profit to ₹301 crore, the bank’s RoE remains robust at 20.9%, indicating efficient capital utilization.
- **High Capital Adequacy:** With a Capital Adequacy Ratio (CAR) of 24.85%, well above regulatory requirements, the bank is well-positioned to expand its lending operations while maintaining financial health.
- **Cost Efficiency:** Ujjivan's cost-to-income ratio improved slightly to 55% in Q1 FY25. As the bank scales its operations and leverages technology for process improvements, there is potential for further cost optimization.
These factors underscore Ujjivan's strong fundamentals, making it a potentially attractive stock for long-term investors.
**Current Market Price (CMP):** ₹40
**Recommended Buying Strategy:**
- **Phase 1:** Buy between ₹40 and ₹38
- **Phase 2:** Buy between ₹30 and ₹26
**Short-Term Targets:** ₹32, ₹37, ₹40+
**Positional Targets:** ₹40, ₹48, ₹55, ₹72, ₹100+
**Key Investment Highlights:**
- **Robust Loan Book Growth:** The gross loan book increased by 19% year-over-year (YoY), reaching ₹30,069 crore by Q1 FY25. This growth is driven by strong demand in the affordable housing (42% YoY) and financial institution lending segments (48% YoY).
- **Strong Deposit Base:** Total deposits grew by 22% YoY to ₹32,514 crore, with retail deposits comprising 74% of the total. A high proportion of retail deposits indicates a stable and granular funding base, potentially reducing the cost of funds and enhancing profitability.
- **Improving Asset Quality:** The bank has shown strong asset quality management, with Gross Non-Performing Assets (GNPA) decreasing to 2.3% from 2.4% YoY, and Net NPA reducing to 0.4%. This reflects the bank's effective recovery processes and low default rates.
- **Profitability and Return on Equity (RoE):** Despite a 7% YoY decline in Q1 FY25 net profit to ₹301 crore, the bank’s RoE remains robust at 20.9%, indicating efficient capital utilization.
- **High Capital Adequacy:** With a Capital Adequacy Ratio (CAR) of 24.85%, well above regulatory requirements, the bank is well-positioned to expand its lending operations while maintaining financial health.
- **Cost Efficiency:** Ujjivan's cost-to-income ratio improved slightly to 55% in Q1 FY25. As the bank scales its operations and leverages technology for process improvements, there is potential for further cost optimization.
These factors underscore Ujjivan's strong fundamentals, making it a potentially attractive stock for long-term investors.
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