Private Sector Banking Stock Reports 21% YoY Strong Business Growth, Buy For 34% Gain, Says PL

Prabhudas Lelladher (PL) initiates a Buy on Federal Bank amid the strong business growth at 21% YoY in Q1FY24. The brokerage has assigned Rs 170 apiece target price on the stock of Federal Bank, claiming 34% strong upside potential from its current level.

Federal Bank is one of India's leading private-sector banks. It is a midcap bank with a market capitalisation of Rs 26,939.11 Crore.

Federal Bank Q1FY24 update - Strong business growth at 21% YoY

-- Gross advances growth was strong at 21% YoY/5.2% QoQ.

-- Loan growth was driven by corporate, +21.6% YoY while retail grew at 20.2% YoY.

--Sequentially wholesale/retail growth was ~3%/6% (Retail:wholesale mix steady at 54:46)

-- Deposit accretion was at 21.4% YoY and 4.3% QoQ; wholesale TD growth was higher to that of retail

-- CASA at 31.9% was down 83bps QoQ and 500bps YoY with growth of 1.6% QoQ & 4.9% YoY.

-- At CMP of Rs126 stock is trading at 1.2x/1.1x FY24E/FY25E. We have a BUY rating with a TP of Rs170 (1.5x Mar-25 ABV).

PL View

According to Prabhudas Lilladher, Provisional numbers were a bit mixed; while retail growth sequentially was a bit higher at 5.5%, wholesale continues to grow. Hence growth in the higher yielding retail pool is the key monitorable which could decide the NIM trajectory for Q1'24. Also, bank seems to incrementally rely on wholesale deposits; RTD+CASA in Q4FY23 made up 88.4% of deposits (94% in Q4FY22).

Federal Bank - Stock Movement

The stock is currently trading at Rs 127.35 apiece, up 0.99% from its previous close. The stock today opened at Rs 127 apiece, while the previous close was Rs 126.10 apiece. Its 52-week high is Rs 143.35 apiece and its 52-week low is Rs 89.30 apiece.

It surged 4.95% in the past 1 week. It gave 36% positive return in 1 year, while in the past 2 years, it gave 49.15% positive return. In the past 3 years, it gave 140.19% positive return. In the past 5 years, it gave 53% positive return.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladhers. 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.