AU Small Finance (AUBANK)

FairStock Score: 54/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Sales growth of 22.33% and profit growth of 17.24% show strong compounding momentum.
• Piotroski F-Score of 8/9 indicates solid recent financial health and operational efficiency.
• Latest quarter net profit of ₹668 Cr on sales of ₹4,727 Cr demonstrates meaningful scale.
• ROE of 13.47% is respectable and supports book value growth of ₹229.55.
• Trading near its 52-week high of ₹1,105 reflects market confidence in the franchise.

Concerns

• Valuation is rich: P/E of 30.98 and P/B of 4.60 leave no margin of safety versus Graham Number of ₹419.42 and DCF value of ₹488.78.
• Negative free cash flow of ₹-916 Cr combined with debt/equity of 7.92 raises balance-sheet risk.
• Altman Z-Score of 0.69 and EV/EBITDA of 1,381.04 are alarming and need deep investigation.
• Promoter holding of 22.79% and dividend yield of 0.10% offer limited alignment cushion and no income support.

AI Analysis

At ₹1,056.50, AU Small Finance is not a stock I would buy today. In Graham's language, price is what you pay, value is what you get. The company is growing sales by 22.33% and profits by 17.24%, and the latest quarter shows sales of ₹4,727 Cr with net profit of ₹668 Cr. A Piotroski F-Score of 8/9 tells me the recent financial statements are clean. But my tests are about protection against permanent loss, and here protection is thin. Book value is ₹229.55, yet the market values each rupee of book at ₹4.60. At 30.98 times earnings, I am paying for many years of future growth. My Graham Number is ₹419.42 and DCF-based intrinsic value is ₹488.78; trading at ₹1,056.50 leaves a margin of safety of -128.49%. That is the opposite of what I seek. The business earns a ROE of 13.47%. That is decent, but not the exceptional return on equity that can justify a P/B of 4.6. For a bank with debt/equity of 7.92, free cash flow of ₹-916 Cr is a concern. The Altman Z-score of 0.69 and EV/EBITDA of 1,381.04 scream caution; even though small finance banks have a different balance-sheet structure, I cannot ignore these numbers. Promoter holding is 22.79%, not a commanding vote of confidence, and the dividend yield of 0.10% means I am not being paid to wait. AU Small Finance is a fast grower. If it can maintain 20% plus growth and convert earnings into tangible capital without deteriorating asset quality, the franchise may eventually justify today's price. But I demand a margin of safety. At this price, I would rather watch from the sidelines and wait for a better price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer