Q2FY19 PAT was better than expected at Rs 443 mn (vs. loss of Rs 119 mn in Q2FY18) on improved asset quality and lower provisions (down 93% y-o-y and 59% q-o-q). GNPAs were down 26% q-o-q at Rs 1.5 bn (ratio at 1.9%, down 80 bps q-o-q) with provision coverage at 84%. Loan book growth was strong at 28.3% y-o-y (non-MFI book gaining traction) with NIM improving 30 bps q-o-q at 11%. Focus is on building the liability franchise (share of CDs at 14%, down from 22% in Q1; retail deposits at 31% of total), expanding footprint and products (non-MFI book at 12% of loans), adding customers (4 million active customers), management continuity (new CEO to be announced by January, 2019, current CEO retiring in Nov 2019) and bringing down cost to income ratio from 77.5% to 55% in 3 years. Maintain BUY with revised target price of Rs 280 (1.6x FY20e ABV) vs. Rs 320 earlier The regulator has asked Ujjivan to list the Small Finance Bank within three years of operations (starting 1st Feb, 2017). The management is evaluating options and this creates an overhang of holding company discount on existing stock price. However, core fundamentals have improved, significant investment in technology is over, liability franchise is taking good shape, new products are gaining traction, along with attractive valuations (1.2x FY20e P\/ABV) \u2013 all these make us retain Buy rating.