Buy IDFC First Bank Ltd For Target Rs.60 - ICICI Direct
Retail slippage impacts PAT; maintains guidance…
About the stock: IDFC First Bank was formed by the merger of the erstwhile IDFC Bank and Capital First in 2018. Retailisation of its business has been key focus.
* Retail funded assets form 64% of gross funded assets
* Branch network is at 601 with 703 ATMs as on June 2021
Q1FY22 Results: Disappointing performance with elevated provisions.
* GNPA up 46 bps QoQ to 4.61% with restructured book at 2.1%
* Sharp rise in provisions (~3x QoQ to |1879 crore) led to loss of | 630 crore
* Steady operational show, NII up 25% YoY, NIMs up 42 bps QoQ to 5.51%
* Advances down 2.8% QoQ & up 9% YoY, deposit up 31% YoY, 3% QoQ.
What should investors do?
The IDFC First stock has given ~30% return in the past three years while the stock price has jumped ~2x in the past one year. Rise in stress remains a near term overhang but a gradual improvement in margin and operational performance is expected to aid return ratios.
* We retain our BUY rating on the stock
Target Price and Valuation: We value IDFC First Bank at ~1.6x FY23E ABV and arrive at a revised target price of | 60 per share (earlier | 65).
Key triggers for future price performance:
* On track for most parameters to achieve midterm guidance
* Granular liability base to help lower cost of funds thus aiding NIMs
* Elevated slippage to remain a near term overhang; expect faster recovery
* Investment in franchise undertaken; sweating of asset to improve efficiency.
Alternate Stock Idea: Apart from IDFC First, in our coverage we also like CSB Bank.
* CSB Bank has shown a meaningful transformation in its overall performance in the past few years and currently focuses on gold and SME loans
* BUY with a target price of | 380.
To Read Complete Report & Disclaimer Click Here
https://secure.icicidirect.com/Content/StaticData/Disclaimer.html
Above views are of the author and not of the website kindly read disclaimer