Our target price for AUBANK is Rs990. We value the stock using a two-stage Gordon Growth Model, with our key assumptions being: a cost of equity of 12.6%, normalized RoE of 16%, growth rate during stage one of 23%, and a steady state growth rate of 4%. This gives us a target multiple of 3.4x 9MFY27E adjusted BVPS (adjusted for net NPLs).

Key downside risks that could mean the AUBANK stock trades below our target price include: slower-than-expected build-up of deposit franchise; margin compression due to stickier cost of funds; rise in slippages or credit costs; and any negative surprises from its unsecured loan book.