Buy Federal Bank Stock For The Target Of 17% In Coming Market Sessions: Sharekhan.

The latest report of Sharekhan gives a buy call to a stock of the banking sector with the potential to gain 17%. Federal bank stock is suggested by Sharekhan, with a target price of Rs. 140. Federal Bank is one of the leading Indian private banks and has over 1272 branches in India throughout different states. The stock of the company has been going up in the past few weeks, and it has the potential to go more than 17% upside from the current market price, says the latest Sharekhan report.

Outlook of Federal Bank company and Stock

Founded in 1931, Federal Bank is one of the oldest and top private banks in India, with branches not only in rural and urban areas of India but in other countries, including Abu Dhabi, Oman, Kuwait, Qatar, and Dubai. The stock's current market price is Rs.119.55, with a market capitalization of Rs.25 170 Crore. The stock has been trading around its all-time highs recently and has an all-time low of Rs. 78.2.

Federal Bank Stock Returns in 5 years

The stock gave a positive return of 0.67% in the last market session and recorded a positive gain of 4.96% in the last week. For over 1 month period, the stock gave an upside of 7.85%, and 3 months' stock returns are recorded as 29.95%. The long-term holders of stock got a positive gain of 44.38%, which is the highest in a year; in 3 years, the stock gain of 44.21%, and in 5 years, it gave a return of 8.48%.

Decoding the call of Sharekhan for an upside of 17% in Federal Bank

As mentioned in the Sharekhan report, the stock is currently trading according to its 17% upside call. According to their call, many factors, such as sustainably healthy loan growth rate, digital capabilities, and stable asset quality with an excellent corporate outlook, can lead the company's stock to surge. Federal Bank is also mixed with higher yielding businesses, including credit cards, vehicles, and microcredit, which makes the bank stand out further, says Sharekhan report.

Outlook on the Valuation of the company

As per the latest reports of Sharekhan, the stock currently trades at 1.2x and 1.1x its FY2023E and FY2024E BV, which we believe is reasonable. Asset quality should improve further with better risk management practices and higher collection efficiencies across segments. Furthermore, 'We find Federal Bank to be an attractive franchise building a strong balance sheet and improving asset quality, which will help it tide over future challenges,' says Sharekhan.

Key risks of buy call from Sharekhan

Higher than anticipated credit costs from restructured portfolios could affect the company stock growth and economic slowdown, because of which slower loan growth can be some factors which can come in the way of achieving the target, says Sharekhan report.