Buy CSB Bank Ltd For Target Rs.380 - ICICI Direct
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On steady recovery path…
About the stock: CSB Bank is a south based private sector bank with Kerala contributing ~50% of the total business. Changed strategy in various aspects of lending has led to transformation and improved performance in the past few years.
* Gold, SME are key lending segments comprising 36%, 13%, respectively, of book
* Liability franchise is healthy with loyal customer base of ~17 lakh
Q2FY22 Results: CSB Bank reported a decent overall performance.
* NII up 21% YoY, NIM up 18 bps QoQ at 5.2%, C/I up to 56% from 48% QoQ
* Overall provisions write-back of | 9 crore boosted PAT at | 118 crore
* GNPA down 77 bps QoQ to 4.11%. R/s book at ~0.8% of loans
What should investors do? CSB Bank’s stock has given more than 30% returns in the past year.
* We retain our BUY rating on the stock
Target Price and Valuation: We value CSB Bank at ~2.6x FY23E ABV and keep our target price unchanged at | 380.
Key triggers for future price performance:
* Strong recovery in gold & MSME loans should continue
* Credit cost to remain benign due to healthy recovery thus aiding profits
* Loan growth to pick up as unlocking progresses and launch of new product
Alternate Stock Idea: Apart from CSB Bank, we also like Axis Bank.
* Strong liabilities franchise, adequate capitalisation and healthy provision buffer to aid business growth as well as earnings trajectory
* BUY with a target price of | 900
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