Buy Andhra Bank, tgt Rs 108: Karvy

Karvy research has maintained buy rating on Andhra Bank with target prie of Rs 108 in its July 17, 2008 report. "In 1st Q FY09, we assume that the Andhra Bank's advances and deposits would grow by 24% and 26.3% (Y-o-Y). The bank's net interest income (NII) would grow marginally by 2.5% (Y-o-Y) to Rs 3.7 billion and operating profit before provisions would grow by 6.3% (Y-o-Y) to Rs 2.37 billion. Higher depreciation provisions on investments of Rs 550 million would led to 18.8% (Y-o-Y) decline in net profit to 1.14 billion. Strain on net interest margin would be due to lower CASA share, higher cost of funds and lower yield on advances. We expect healthy growth in total fee income but treasury income could report degrowth. Total net income is expected to grow by 5.6% (Y-o-Y) to Rs 5.0 billion. At current market price, the stock is available at 0.65x ABV FY2010; we rate the stock as a BUY with a price target of Rs 108 at 1.34x adjusted book value FY2010" according to Karvy report.