Buy This Largecap Banking Stock For Sharp 29% Upside, CASA Mix Improves To 50%: Motilal Oswal

IDFC First Bank has strengthened its balance sheet over the past few years as it consciously increased the mix of retail business. The bank reported 5x growth in retail deposits over the past 3 years and simultaneously improved the CASA mix to 50%. Motilal Oswal, a top brokerage firm recommends investors buying the stock of IDFC First Bank.

Stock To Buy: Target Price

The Current Market Price (CMP) of IDFC First Bank is around Rs. 54. Motilal Oswal has estimated a Target Price for the stock at Rs. 70. This stock has the potential to give a 29% return, in the upcoming 1 year. It is a bluechip stock with a market capitalization of around Rs. 34,902 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 54
Target Price	Rs. 70
Potential 1 year return	29.00%
52 week high share price	Rs. 56.35
52 week low share price	Rs. 28.95

Stock Valuation - mentioned by Motilal Oswal

Giving a buy rating the brokerage firm stated, "We estimate 35% CAGR in PPoP during FY22-25E while controlled credit costs will drive 199% CAGR in PAT over the similar period. We thus estimate RoA/RoE to reach 1.3%/13.9% in FY25E, respectively. We initiate coverage with a buy rating and a target price of Rs. 70 (premised on 1.5x Sep'24E BV). Key risks are slowdown in deposit growth momentum, higher cost-to-income ratio, and headwinds in retail asset quality."

Growth levers in place

The bank is entering a phase of strong loan growth as the drag from wholesale book moderates and we estimate loans to report 21% CAGR during FY22-25E. The bank has scaled up retail deposits (CASA/retail TD) at a robust 73% CAGR over FY19-22 with solid CASA mix of 50%. It has invested well in digital capabilities, branch and product expansion and has presence across retail products. Cost ratios are elevated but will moderate as scale benefits come into effect, while retirement of high-cost borrowings will aid NII growth, the brokerage firm said.

Well-diversified retail asset base

IDFC First Bank has scaled up its retail and commercial loan book at a robust pace of 31% CAGR over FY19-22. Within this, the share of different segments such as consumer loans, home loans, LAP, rural finance, wheels and commercial loans is fairly well balanced with mortgage (including LAP) accounting for 37% of total loan book. Credit card has a low share in the mix (2%) as it is a recently launched product and is in a scale-up phase.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.