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A Small-Cap Bank: Rs 10,000 Cr Market Cap, 15% Upside!

Published 14-06-2024, 10:43 am
EQUI
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The Nifty Bank index reclaimed its 50,000K mark in today’s session, gaining 0.49% to 50,100, by 10:21 AM IST. While many large banks are trading near their highs and at not-so-lucrative valuations, investors can have a look at small-cap space.

One counter that can be put on the watchlist is Equitas Small Finance Bank (NS:EQUI) Limited. It is a private-sector lender with a market capitalization of INR 10,850 crore. In FY24, the bank clocked a record-high revenue and net profit of INR 6,285.07 crore and INR 798.96 crore, respectively which translates into a net profit margin of 12.71%, the highest since FY16.

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Even FIIs hold a good 19.5% stake in the bank which is not so common for such a small bank. However, when you look at the mutual funds’ holdings, it’s at a staggering 38.16%, slightly up from 37.93% a year ago.

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To see its fundamentals in the easiest manner we turn our attention to the financial health score of InvestingPro. It analyzes over 100 parameters across 5 major categories such as growth, profitability, relative valuation, etc., and assigns a score to each of them out of 5. Then the final score is analyzed which has to be 3 or above in order for the stock to qualify for any investment. In this case, a score of 4 shows great performance by the bank.

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Proceeding further, we check the valuation gap which has to be over 10%. Here, another feature of InvestingPro - Fair value comes into the picture. Fair value analyzes the stock via multiple financial models and calculates their respective intrinsic values. All of it is done at the backend without the need for the user to perform any modeling skills.

Multiple models are used to negate any extreme valuation and make the end result more realistic, giving equal weightage to each model. Here, the fair value of INR 116.3 depicts a decent upside of 14.7% from the CMP of INR 101.4. This means investors looking to buy this stock can set their target around INR 116 which is fundamentally the true worth of the stock. Hence the fair value can also be used as a target price on the fundamental ground.

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Read More: Unlocking Investment Potential via Fair Value

X (formerly, Twitter) - Aayush Khanna

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