2 Bank Stocks To Buy With An Upside Target Of 18%, Says Emkay Global

Emkay Global, a brokerage firm, is optimistic about Canara Bank and ICICI Bank, recommending a buy on the stock with an 18 percent upside target. According to the brokerage, the price targets for the stocks can be met within the next year.

Buy ICICI Bank with target of Rs 825

In its research report dated August 25, 2021, Emkay Global Financial suggested a buy rating on ICICI Bank, with a target price of Rs 825. RBI extends the tenure of the MD and CEO for another two years; they are eligible for two more full terms.

Current Market Price	Rs 694
Target Price	Rs 825
Upside potential	18.8%

According to Emkay Global financials, by FY23E/FY24E, the bank to recapture its decade-best RoEs of 15%/16%, owing to improved growth and good core profitability. Mr. Bakhshi has given the management team much-needed credibility and steadiness. As a result, we believe that his continued relationship with the bank will be critical for the stock's future re-rating.

"ICICI remains our top pick in the sector. Retain Buy/OW in EAP with a TP of Rs825 (2.5x Sep'23E ABV + subs value of Rs170), given its solid growth trajectory, superior core profitability, healthy capital/provision buffers, and management credibility/stability unseen in the past.

The RBI's term extension for two years, instead of the general practice of a three-year extension, is in line with the valid board/shareholder approval for his appointment for a five-year period from October 15, 2018, to October 23, 2023. Thus, it should not be seen as a short-term extension by the RBI similar to RBL/DCB," the Brokerage said in its research report.

Buy Canara Bank with target of Rs 185

In its research report dated August 25, 2021, Emkay Global Financial suggested a buy rating on Canara Bank, with a target price of Rs 185. QIP will help to shore up core capital levels, but expansion will require more.

Current Market Price	Rs 156
Target Price	Rs 185
Upside Potential	18.8%

According to Emkay Global Financials, CBK raised Rs25 billion this week via the second tranche of QIP at a better price of Rs149.3 per share, following the first round of capital raise in December.
The brokerage anticipate the capital raise will mostly be used to shore up the company's capital ratios, which have remained low in comparison to rivals since the merger with Syndicate Bank.

"We believe that merger-related concerns are largely behind and the bank should report a gradual improvement in its RoA/RoE to 0.4-0.5%/10-11% by FY23E-24E, led by better growth and moderate LLP. Retain Buy with a TP of Rs185, valuing the core bank at 0.6x Sep'23E ABV and subs at Rs22 per share", the brokerage said in its research report.

Disclaimer

The above stocks are based on the report of Emkay Global Financials. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.