Buy ICICI Bank Ltd For A Potential Upside of +40% Says Motilal Oswal

Motilal Oswal Financial Services Limited, an Indian brokerage firm, has issued a buy recommendation to ICICI Bank Limited's shares. The brokerage has set a target price of Rs. 1,000 for the stock, representing a 40% jump from the current market price of Rs. 717. ICICI Bank is India's leading bank. At the 'The Asian Banker Excellence in Retail Financial Services International Awards, 2021,' ICICI Bank has been named the 'Best Retail Bank in India' and this is the bank's eighth year in a row winning this honor.

The brokerage’s take on ICICI Bank Ltd

Motilal Oswal in its research report has said that "We attended ICICIBC analyst day, where the management highlighted how the strengthening of its digital capabilities is helping transform the bank and increase throughput rates while offering customers a superior experience. The bank is capable of building and scaling digital capabilities like the best of the FinTechs, though agility, constant innovation, and customer focus remains the key to success. ICICIBC has been reporting strong growth in Retail advances, supported by an impressive share of digital originations, while SME/Business Banking growth has been robust, aided by various digital applications. With a resilient asset quality and an improving economic environment (as reflected by key economic indicators - GST collections, GDP growth, and PMI), it appears firmly positioned to deliver healthy sustainable growth. We estimate ICICIBC to deliver ~25% earnings CAGR over FY22-24E, while RoA/RoE improves to 2%/16.6% in FY24E. ICICIBC remains our top pick in the sector."

According to the brokerage "The bank has a strong market share across various products, i.e. 10% in FDI/ODI flow, 6.6%/7.9% in Import/Export trade flow, 5.7% in Forex market share, 14.5% in GST, and 22.7% in Direct Tax collection. Capacity utilization levels rose to ~80% across sectors such as Steel, Petroleum, Power, and Textiles, and the capex cycle is likely to revive gradually in 12-18 months."

Buy ICICI Bank Ltd With A Target Price of Rs. 1000

According to the brokerage's research report ": ICICIBC continues to report a strong core PPOP performance, controlled provisions, and robust asset quality, with NNPA ratio (less than 100bp) at the lowest level since Dec'14. The steady mix of a high-yielding portfolio (Retail/Business Banking) and a low-cost liability franchise is aiding margin expansion. The bank appears firmly positioned to deliver healthy, sustainable growth supported by continued investments in technology and expansion in its digital offerings. ICICIBC is seeing a strong demand recovery in consumption loans, led by both secured and unsecured Retail, while Business Banking and SME portfolios have emerged as strong growth engines."

Motilal Oswal has also claimed that "The bank has demonstrated a resilient asset quality performance and credit cost is likely to stay under control, supported by higher provisioning coverage (~80%), contingency provisions at 0.8% of loans, and a controlled slippage run-rate. We estimate ICICIBC to deliver ~25% earnings CAGR over FY22-24E, while RoA/RoE improves to 2%/16.6% by FY24E. ICICIBC remains our top Buy in the sector. We reiterate our Buy rating with a SoTP based TP of INR1,000 (2.8x Sep'23E ABV)."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Financial Services Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.