Motilal Oswal Gives Buy Call To This Banking Stock For Gains Up To 19%

Motilal Oswal has given buy call to the stock of ICICI Bank for a potential gain of 19% with a target price of Rs 883 apiece. ICICIBC's Annual Report reaffirms our view that the bank is progressing well in its endeavor to strengthen its Balance Sheet, with a strong focus on the Retail franchise.

ICICI Bank Stock Outlook

The current market price of the stock is Rs 877 apiece with a 52-week high of Rs 886 apiece and 52-week low at Rs 642 apiece. According to Motilal Oswal, if investors buy the stock now it has the potential to surge to 1050 apiece with a potential gain of 19%.

ICICI Bank Return In Last 5 Years

The stock has given 199% return in the last 5 years, 109% return in 3 years, and 27% return in last 1 year.

Strong Growth In Retail Deposits

The bank continues to see a strong growth in Retail deposits and has successfully maintained a robust liability franchise. Total deposits/CASA clocked ~17%/~16% CAGR over FY17-22. CASA ratio remains healthy at 48.7% in FY22. The growth in its deposit franchise was supported by continuous efforts to strengthen its digital platforms and simplification of processes to provide a seamless banking experience to customers.

Profitability in the Corporate/Retail segment grew 56%/47%

Segmental profitability suggests Retail PBT grew 47% YoY and contributed ~37% to total profits, aided by lower provisions, as revenue growth was modest at 12%. Revenue from the Corporate segment grew 7% YoY. It reported a strong uptick in PBT, which grew 56% YoY to INR91b, underscoring the structural improvement in the Corporate segment.

Credit cost undershooting long term trends

ICICIBC has made excellent progress towards improving its asset quality, with a best in class PCR of ~80%, which, coupled with contingent provisions of ~INR85b (0.9% of loans), will keep credit cost benign. An improvement in underwriting, led by increasing adoption of analytics, a lower BB and below book, and controlled restructuring will keep slippages under control.

We expect GNPA/NNPA to moderate to 2.4%/0.5% by FY24 and credit cost to undershoot its long-term trends at 0.7% over FY22-24.

Valuation

According to Motilal Oswal, "Ahead of this new growth cycle, it is well-positioned with a superior margin, strong RoE and asset quality, and robust capitalization levels. Return on the stock will be a function of earnings growth and a re-rating over the coming years, and ICICIBC has all the ingredients in place to command the pole position in the Indian Banking space. We expect the bank to deliver a FY24 RoA/RoE of 2.1%/17.1%. We reiterate our Buy rating with an SoTPbased TP of INR1,050 (2.8x FY24E ABV). ICICIBC remains our preferred play in the sector.

Market Capitalization

It has a market capitalization of Rs 6,10,331.42 crore.

About ICICI Bank

ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. Until the late 1980s, ICICI primarily focused its activities on project finance, providing long-term funds to a variety of industrial projects.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal Financial Services. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.