This Private Bank's Stock Has Potential To Gain 46%, Net Profit Can Hit Rs. 45bn In FY23: ICICI Securitities

Brokerage firm ICICI Securities is suggesting buying the stock of Bandhan Bank, for a likely 46% return.

Stock To Buy: Target Price

The Current Market Price (CMP) of Bandhan Bank is Rs. 278. ICICI Securities has estimated a Target Price for the stock at Rs. 408. This stock has the potential to give a 46.76% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 42,348 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 278
Target Price	Rs. 408
Potential 1 year return	46.76%
52 week high share price	Rs. 349.55
52 week low share price	Rs. 229.55

Financials and stock performance

The company's NII in FY22 was recorded at Rs. 87 bn, which is expected to reach at Rs. 105 bn in FY23. Their net profit in FY22 stood at Rs. 1 bn, which is expected to be at Rs. 45 bn in FY23. Amid weak global cues, Indian stock markets have fallen significantly in the last one week. This private sector bank's share price has also dropped by 11.40% in the last 5 days on NSE.

Stock Advantages: ICICI Securities

"On disbursement and collection efficiency, we expect a trend towards normalisation post the Q1FY23 disruption due to revised RBI regulations and Assam floods. We are constructive on mortgage lending growth as well. Positively, incremental requirement for RIDF investment, or PSL certificate buyout, would be minimal given no further PSL declassification. Increased franchise investment will likely continue. Maintain BUY with a revised target price of Rs. 408 assigning 2.5x FY24E book," the brokerage firm said.

Balance flow

In Q1FY23, Rs27.5bn of Mar'22 restructured pool got out of moratorium, but the bank could recover only Rs. 2.5bn of it with the balance flowing into various delinquency buckets. Another Rs. 21.4bn from the restructured pool will move out of moratorium in Q2FY23. "Given that 43% of this pool were non-paying customers, we expect further rise in delinquency buckets. In Q1FY23 itself, EEB segment SMA-2 pool spiked to 5.6% (from 1.9%/2.9%/2.5%): 6.2% (2.2%/3.2%/1.8%) for WB, 18.9% (4.4%/5.7%/4.5%) for Assam, 2.9% (1.1%/3.2%/1.9%) for other states. Similarly, SMA-1 pool, too, has increased to 2.4% (vs 1.6%/2.9%/7.1%/10.1% in Q4/Q3/Q2/Q1FY22 and 2.8% in FY21) with 2.8% for WB, 3% for Assam, 2.0% for other states. We believe seasoning will likely lead to forward flow from this pool as well," ICICI Securities mentioned.

Company Portfolio:

On August 23, 2015, Bandhan Bank was established with a bouquet of products for customers in all segments. In its journey from an NGO to an NBFC and finally a universal bank, the objective has remained reaching out to the unbanked and the under-banked and providing last-mile banking for all, big or small. In Q1FY23, the bank created provisioning of Rs6.4bn leading to credit cost print of 2.7%.

Disclaimer

The above stock was picked from the brokerage report of ICICI Securities. 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.