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Trading Near To Its 52-Week Low, Buy This Bank Stock For 41% Upside

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CSB Bank's shares were trading at a market price of Rs. 243 as of 3:30 p.m. IST on January 27. On 05 July 2021 and 27 January 2021, the stock reached a 52-week high of Rs 374.00 and a 52-week low of Rs 213.80, respectively. It is now trading 35.02 percent lower than its 52-week high and 13.65 percent higher than its 52-week low. On the other hand, brokerage company Edelweiss Broking Ltd has issued a buy call on the stock and has set a target price of INR 344, estimating a potential upside of 41 percent from the current market price.

 

Key investment rationale for CSB Bank according to the brokerage

Key investment rationale for CSB Bank according to the brokerage

  • CSB Bank (CSB)'s Q3FY22 results were broadly in line with expectations on the operating fronts and balance sheet growth was consistent with management guidance. Provision write-back due to healthy recovery and moderate slippage led to 179% YoY and 25% QoQ jump in net profit to INR148cr.
  • Advances grew 11% YoY and 3% QoQ to INR15,610cr in line with forecasts. Corporate, Assignment and Agri & MFI loans witnessed steady growth, along with an uptick in gold loans, which were declining for the last two quarters. Deposits grew in mid-single-digit, largely driven by CASA, and the bank reported a substantial surge in low-cost deposits.
  • A dip in treasury income offset strong growth in net interest income, resulting into muted net revenue growth. Operating cost grew at a faster pace due to strengthening branch network and strong hiring.
  • The bank reported an all-time high recovery and upgrades, along with a moderate slippage, leading to considerable improvement in asset quality.
Buy With A Target Price of Rs. 344
 

Buy With A Target Price of Rs. 344

Edelweiss has said in a report that "CSB reported that record-high return ratios aided the provision write-back. RoA and RoE stood at 2.4% and 27% (annualised) vs 1% and 12% in Q3FY21, respectively. We believe the current quarter's return ratios are optically high due to a one-off gain, but the bank has the potential to register RoA and RoE of 1.5% and 15% in FY24, respectively, with credit growth expected to be in low- to mid-twenties for the next few years. Therefore, we maintain a 'BUY' rating with TP of INR344/share."

Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Broking. 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.

Story first published: Friday, January 28, 2022, 9:40 [IST]
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