Ujjivan Small Finance Bank - Q3 FY21 Result Update - YES Securities

(Rating: ADD, TP: Rs 40, Upside 8.1%)

Larger stress and upfront provisioning drives a big loss in Q3 FY21

- We are changing our rating from BUY to ADD with significant downward revisions (6-7%) in FY21-23 ABV estimates and with a view that valuation multiple will get impacted with the large negative surprise of Q3 FY21 (Management did not guide well). The stock currently trades at 1.7x FY23 P/ABV.

- USFB reported a big loss in Q3 FY21 with the bank opting to address the entire stress (including what may come) at one go - credit cost was Rs5.8bn and provisioning buffer was substantially raised to 8% of overall portfolio.

- The large provisioning in the quarter was triggered by a high PAR 0 figure and uncertainty around Assam portfolio (2.7% of advances - collections dropped in January after passage of the MFI Bill).

Source : Equity Bulls

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