Target: ₹57

CMP: ₹42.25

Ujjivan SFB (Ujjivan) has delivered better-than-expected numbers for Q4FY25. NII came in at ₹860 crore (down 7 per cent y-o-y/down 3 per cent q-o-q), which was below our estimate of ₹820 crore. Cost/assets continued its upward trajectory to 6.7 per cent vs. 6.5 per cent in Q4-FY24. Slippages stood flat at 4.7 per cent vs. 4.7 per cent in Q3-FY25, with 87 per cent coming from MFI.

The trend in MFI slippages going ahead should get under control as the PAR trend across buckets improves. Credit cost spiked to 3.38 per cent vs. 2.93 per cent in Q3-FY25 and 4.3 per cent for FY25. RoA and RoE were subdued at 0.7 per cent and 5.5 per cent, respectively. However, there were several encouraging developments such as an improvement in Bucket X CE for both Group and IL books, reaching 99.5 per cent as of March 2025.

Further, April 2025 the bank has reversed the yield cuts (115bps on the JLG book and 75bps on the IL book) taken on its MFI portfolio in January 2025, as bank if confident of growth revival in the sector.

Given this backdrop and undemanding valuation (1.1x FY27ABV coupled with expected RoE improvement to about 17 per cent from 12 per cent in FY25), we maintain Buy on Ujjivan with a revised target price of ₹57 (earlier target: ₹59).

Published on May 2, 2025