Suryoday Small Finance Bank downgraded to 'Hold' by MarketsMOJO, but shows strong financials and potential undervaluation

Suryoday Small Finance Bank, a smallcap private bank, has recently been downgraded to a 'Hold' by MarketsMOJO on October 21, 2024. This decision was based on various factors, including the bank's high Capital Adequacy Ratio of 41.50%, indicating strong buffers against risk-based assets. Additionally, the bank has shown healthy long-term growth with an annual growth rate of 37.12% in Net Interest Income and 79.86% in Net Profit.
The company has also declared positive results for the last 9 consecutive quarters, with the lowest Gross NPA (2.84%) and Net NPA (0.47%) in the industry. Its Net Interest Income (NII) of Rs 293.23 crore is also the highest in the industry. With a ROA of 1.9, the bank has a very attractive valuation with a price to book value of 0.9, trading at a discount compared to its historical valuations.

However, the stock is currently in a mildly bearish range, with technical indicators such as MACD, Bollinger Band, and KST showing a bearish trend. Institutional investors have also decreased their stake in the company by -4.16% over the previous quarter, holding only 11.5% collectively. This could be a cause for concern as institutional investors have better resources to analyze company fundamentals.

In the last year, the stock has underperformed the market, generating a return of only 3.33% compared to the market's (BSE 500) return of 34.48%. While the company's profits have risen by 102.8%, the stock's PEG ratio is at 0.1, indicating a potential undervaluation. Overall, with a 'Hold' rating, investors may want to closely monitor the stock's performance before making any investment decisions.