Emkay Global Initiates Buy On Midcap Private Sector Banking Stock, Sees 33% Potential Upside

Brokerage firm Emkay Global initiates a Buy call on Bandhan Bank post Q1FY23 results announcement. The bank posted AUM growth of 7% YoY/was down 5% QoQ in a seasonally weak 1Q, as the MFI book declined 12% YoY/10% QoQ as well as due to repayment of loan (of Rs22bn) from one large account.

The brokerage assigned Rs 285 apiece revised target price on Bandhan Bank, claiming 33% potential upside from its current level.

Path to full recovery still a little further away

According to Emkay Global Despite slower growth and surge in NPAs due to recognition of stress from the ECLGS pool, as guided by the RBI, Bandhan Bank reported a strong beat on our PAT estimates, coming in at Rs7.2bn (Emkay: Rs4.5bn), due to steady margins and lower provisions (as the bank need not make provisions on the ECLGS guaranteed stress pool). Bank expects the recovery to improve, led by ARC sale and CGFMU recovery, while it sees credit cost at ~2% for FY24.

Buy for a Target Price of Rs 285 apiece

The brokerage said, "We cut our FY24-26E earnings by 4%-9%, factoring-in the slower growth and higher opex. However, we expect improvement in RoA to 2.2-2.5% and in RoE to 17-21% over FY24-26E, from the low of 1.5/12% in FY23, as the stress pool moderates from its Covid peak. We retain our BUY rating, with revised TP of Rs285/share, based on 1.7x Jun-25E ABV (vs Rs300/share earlier, based on 1.8x Mar-25E ABV/share)."

Stock Outlook

The shares of Bandhan Bank last traded at Rs 215.35 apiece on BSE, down 2.89% from its previous close of Rs 221.75 apiece. Its 52-week high is Rs 314.75 apiece and 52 week low is Rs 182.20 apiece.

The shares declined 5.78% in 1 week, however, it jumped 4.21% in 3 months. It declined 20.30% in 1 year, 30.38% in 2 years and 38.97% in 3 years, respectively.

Disclaimer

The stock has been picked from the brokerage report of Emkay Global. 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 consult with certified experts before making any investment decision.