Axis Securities Picks This Banking Stock For 25% Potential Return, Target Price Rs 70

Axis Securities in its latest report has picked IDFC First Bank and given buy call to the stock with a target price of Rs 70 apiece. If you buy the stock now it can give potential return of up to 25%. According to the analyst, IDFC First Bank (IDFCFB) reported robust performance and beat our expectations across all front. IDFCFB reported strong loan growth momentum (up 24% YoY/ 6% QoQ) in Q2FY23 along with consistently robust asset quality. Check key takeaways below:

1. IDFC First Bank Stock Outlook

The current market price of IDFC First Bank is Rs 56 apiece with 52-week high at Rs 59 apiece and 52-week low at Rs 28 apiece, respectively. It has a market capitalisation of Rs 34,907 crore.

2. IDFC First Bank Return

The stock has fallen 1% in last 5-years. It has given a return of 26% in last 3-years and 13% in last 1-year.

3. Asset Quality Continued To Improve

In retail and commercial segment the GNPA/NNPA came down sequentially by 8/20bps to reach 2.03%/0.73% respectively. In Q2FY23 credit cost on an annulized basis stood at 1.2%. Credit cost in the retail segment stood at 1.5- 1.6% annualised. The restructured book improved QoQ by ~30bps of advances from 1.3% in Q1FY23 to 1% in Q2FY23.

Management indicated gross slippages were similar as that of last quarter. Management sold Security receipts which released provision of about Rs 200 Crs during the quarter. The same was utilized to improve the PCR for retail segment.

4. IDFC First Bank Valuation

According to Axis Securities, "With a strong and granular deposit base, IDFCFB is focused on growing its loan portfolio wherein retail book is expected to drive the same. Scale of business and operating leverage will be key driver of ROE. Continuous improvement in asset quality, strategy to improve operating performance with expected operating leverage to kick in along with the expected achievement of superior return ratios over FY23-25E, we expect the stock is poised for re-rating. We maintain our 'BUY' rating with unchanged target price of Rs 70/share (1.6x FY25E ABV), implying an upside of 20% from the CMP."

5. About IDFC First Bank

IDFC Bank, headquartered in Mumbai offers numerous financial services through its nationwide branches, internet and mobile. It offers services like saving accounts, fixed deposits, home loans products, personal loans, NRI accounts by using technology and service -oriented approach, to make banking more simple and accessible at anytime and from anywhere, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.