This Midcap Banking Stock Drops, To 52-Week Low, “Buy the Stock”, Say Brokerages

The Sensex and the Nifty are fast inching to record highs. However, corporate results are determining stock specific action in many companies. Here is a banking stock that has dropped to 52-week lows post its quarterly results.

Bandhan Bank: Stock at new 52-week low

The stock of Bandhan Bank has dropped to a new 52-week low of Rs 224.50 on the National Stock Exchange. Earlier, the stock had hit a 52-week high of Rs 349, which shows a substantial drop from those levels. One of the reasons for the drop is the poor quarterly numbers for the bank. The reported a miss on its net profits at Rs 2.1billion due to higher-than-expected NPA formation leading to higher LLP/lower margins and elevated opex due to business normalization. The bank expects H2 to see recovery in growth/margins as asset-quality pain recedes. This could be helpful for the stock in the coming quarters.

Buy the stock, says Emkay Global

Emkay Global has trimmed its FY23-24E earnings estimates by 5 per cent, factoring higher non performing assets and operational expenditure for the bank. "We expect the bank to gradually move back towards normalcy with RoEs at 20-22% in FY24/25E. We reduce our target to Rs 330 from Rs 340 (valuing the bank at 2x Sep-24E ABV); however, given reasonable upside (>15%), we upgrade the rating to Buy from Hold," the brokerage has said.

Mortgage growth accelerates

For Bandhan Bank there was moderate credit growth at 17% yoy/-1% qoq mainly due to slower disbursements in the MFI business. "This was mainly due to underlying asset-quality weakness in MFI, seasonal weakness, and stringent MFI lending norms. However, the bank expects its growth trajectory to improve due to seasonal pick-up in MFI disbursements and continued strong growth in mortgages/commercial lending book. The bank remains determined to diversify its loan portfolio towards secured loans, which could have some impact on margins in the long run, while reducing asset-quality volatility," Emkay Global has said.

Buy the bank stock, says Motilal Oswal

This broking firm does not have an optimistic target of Rs 330 like Emkay Global. However, it does have a buy call with a price target of Rs 300, which still means an upside potential of 33% from current levels. "On the asset quality front, GNPA/NNPA ratio saw a marginal improvement (6bp QoQ each) to 7.2%/1.9%, with PCR healthy ~76%. Collection efficiency in the MFI portfolio (including NPA and restructuring) moderated to 90% in Sep'22 from 91% in Jun'22. Excluding NPA, CE improved marginally to 95% v/s 94% in Jun'22," Motilal Oswal has said in its report.

"We remain watchful of asset quality, mainly the high SMA book, particularly in the Assam portfolio, which can keep credit cost elevated. It has raised its credit cost guidance for FY23 to 3% (+/- 15bp) from 2.5% earlier. We have lowered our FY23/FY24 earnings estimate by 18%/11%. We maintain our Neutral rating with a revised target price of Rs 300 (based on 2x FY24E BV)," the brokerage has added.

Disclaimer

Greynium Information Technologies, the Author, and the respective Brokerage Houses 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 decision.