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Broker’s Call: Spandana Sphoorty (Buy)

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Target: ₹934

CMP:822.80

Spandana Sphoorty Financial Ltd (SSFL), a non-banking financial company focused on microfinance operations in rural and semi-urban regions, continued its positive trend in financial performance during Q1FY24.

The NBFC reported a PAT of ₹119.50 crore, a significant improvement from the loss of around ₹219.70 crore in the previous year. This positive result was primarily driven by a notable reduction in credit costs to approximately 40 bps, compared to around 170 bps in the previous quarter.

Additionally, the company experienced a sequential expansion of around 30 bps margins. NII saw a 9 per cent QoQ growth, reaching approximately ₹293.40 crore.

We maintain a BUY rating with a target price of ₹934 on FY25 BVPS of ₹584 with a P/BVPS multiple of 1.6x. With the company’s impressive reduction in credit costs, expansion in margins, and consistent focus on customer acquisition, we expect to see a robust CAGR of approximately 32 per cent in AUM from FY23 to FY25 and a strong FY25 RoA/RoE of 4.1/14.8 per cent respectively.

Additionally, SSFL’s strategic initiatives to strengthen governance and risk controls, coupled with its ongoing technology advancements, demonstrate its commitment to enhancing operational efficiency.





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