Utkarsh SFB Q1 Results Review - Core Operating Performance Remains Robust, PPoP Up 10%: ICICI Securities

ICICI Securities Report

Utkarsh Small Finance Bank Ltd.’s Q1 FY25 core operating performance continued to be robust as reflected in 10% QoQ pre-provision operating profit growth and return on equity sustaining at more than 18% despite challenges due to heatwaves and election.

While asset quality parameters deteriorated sequentially as reflected in SMA 1 and 2 increasing to 2.6% versus 1.9% QoQ, collection in MFI falling to 96% versus 98% QoQ and elevated slippage ratio at ~4% during Q1 FY25, management sounded confident of achieving FY25 credit cost guidance of ~2% versus 2.7% in Q1 FY25.

It has implemented new guardrails announced by MFIN and does not foresee any material impact on its FY25 credit growth guidance of 30%.

We continue to prefer Utkarsh within SFB space considering its balanced growth approach and sharp focus on asset quality, even while growing balance sheet and profitability.

Maintain Buy with an unchanged target price of Rs 70, valuing the stock at two times Sep’25E book value per share.

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