AUBANK - Investment Analysis

Last Updated Time : 02 Aug 25, 12:58 am

Investment Rating: 4.0

📊 Fundamental & Valuation Analysis

AU Small Finance Bank (AUBANK) is a fast-growing private lender with strong profitability and asset quality. However, its valuation and debt levels raise caution for long-term investors.

🔍 Key Metrics

Metric Value Interpretation

ROE 22.3% Excellent profitability

ROCE 12.4% Moderate capital efficiency

PEG Ratio 3.31 Overvalued relative to growth

Dividend Yield 0.14% Minimal income generation

Debt-to-Equity 3.56 High leverage, risk factor

P/E Ratio ~26.2 Reasonable vs industry PE of 20.3

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Price-to-Book ~3.41 Slightly expensive

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📈 Growth & Profitability

EPS: ₹29.3 — strong earnings base

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PAT Q1FY26: ₹581 Cr — up 15.6% YoY

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Revenue Q1FY26: ₹5,189 Cr — up 20.3% YoY

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Net Interest Margin: ~5.9% — competitive for small finance banks

📉 Technical & Trend Analysis

Current Price: ₹741

RSI: 39.2 — neutral to slightly oversold

MACD: -13.0 — bearish momentum

DMA 50/200: ₹756 / ₹675 — trading below short-term average

Volume: Near average — steady interest

📌 Ideal Entry Price Zone

Support Levels: ₹715 and ₹670

Fair Entry Range: ₹700–₹730

Below ₹730 offers better margin of safety

Avoid entry above ₹770 unless trend reversal confirmed

🧭 Exit Strategy & Holding Period

If you already hold the stock

✅ Hold If

You believe in India’s financial inclusion story

You trust management’s strong asset quality and branch expansion

You’re comfortable with high debt and valuation premium

🚪 Exit Strategy

Short-Term Exit: If price rallies near ₹800–₹840 without earnings support

Hold Period: 3–5 years to benefit from compounding in loan book and fee income

Re-evaluate: If ROE drops below 15% or credit costs rise sharply

🧠 Final Verdict

AU Small Finance Bank is a high-growth private lender with strong profitability and expanding reach. While valuations are elevated and debt levels are high, the bank’s consistent earnings and asset quality make it a reasonable long-term candidate — especially if entered near support levels.

Would you like a peer comparison with Equitas SFB or Ujjivan SFB to evaluate alternatives in the small finance space?

1

bing.com

2

www.moneycontrol.com

3

www.google.com

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