LIC-Backed Bank Stock Hit 52W High: What Should Be Your Trade Call?

Mid cap private sector bank South Indian Bank made a fresh 52-week-high today. The stock opened on the BSE at Rs 27.12 apiece and made a fresh 52-week-high of Rs 27.48 during the morning deals. However, the analysts of ICICI Direct Research see more potential upside on the stock as they have recommended to buy the scrip at Rs 25.30-26.00 apiece, keep a stop-loss at Rs 23.50 for a target price of Rs 30 which implies an upside of 15% from the current market price in a target frame of 3 months.

South Indian Bank Share Price Target

The analysts of ICICI Direct Research said in a note that, "South Indian bank share price accelerated surpassed four-week highs this week indicating resumption of uptrend after brief pause offering fresh entry opportunity to ride the medium term uptrend."
"Structurally, share price has given a strong breakout from five-year consolidation range (July18- July23) above Rs 22 indicating that share price is entering structural uptrend after several years of underperformance. We expect share price to relatively outperform and generate alpha within mid cap banking space over next few quarters," they further stated.

"We expect share price to head towards Rs 30 over next few months as it is a measuring implication of short-term consolidation pattern (Rs 22- 14=8 points) that also coincides with monthly high of February 2018 when stock reversed from its uptrend," they said in a note.

South Indian Bank Fundamental Outlook

"The bank has undertaken impressive business transformation from Oct'20, overhauling key functions through creation of new divisions, introduction of high yielding new products, verticalization of asset business & focusing on digital strategies, which has enabled to deliver impressive performance. In last 2.5 years, bank churned ~58% of book with strong quality, improvement of ~500 bps in CASA to ~33% & decline in GNPA from 5.9% to 5.1% while PCR increased from ~58.7% to ~76.8%.

Expect credit growth in-line with industry at 12-13% in FY24-25E. Steady liabilities mix, repricing of ~65% of deposits, launch of new retail products & focus on high yielding segment (currently at ~3.6%) is seen to drive ~10-20 bps improvement in margins. Gradual improvement in efficiency (~80-100 bps improvement in CI ratio) and moderation in net slippages (expected below 1% & NNPA below 1.5%) is expected to drive RoA to ~0.8% on a conservative basis in FY24-25E. Thus, anticipation of continued gradual improvement in RoA & healthy business growth available at inexpensive valuations provides comfort, said the brokerage firm ICICI Direct Research.

South Indian Bank Shareholding

During Q1FY24, insurance giant LIC held fully paid up equity shares of 5,63,69,232 or 2.69% stake in the bank. In April to June 2023 quarter, the company reported promoters shareholding of 13.59%, FIIs stake of 7.84%, and public stake of 78.57%.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.