Edelweiss is bullish on Karnataka Bank has recommended buy rating on the stock with a target price of Rs 187 in its research report dated May 17, 2017.
Edelweiss' research report on Karnataka Bank
Karnataka Bank’s (KBL) INR 1.4bn (up >29% YoY) PAT in Q4FY17 surpassed our estimate following higher treasury gain of INR 1.6bn. Meanwhile core operating profitability (ex-treasury) continues to be soft given NII dip of >2% YoY (NIMs dip of > 20bps QoQ, interest income reversal on SDR accounts) and softer core fee.
Going ahead, stable NIMs and limited downside from current credit costs will lead to >18% earnings CAGR over FY17-19E with RoE potential of 10-12%. The stock trades at 0.9x FY19E P/ABV, capturing risks and limiting downside. We maintain ‘BUY/SP’ with target price of INR 187 (1x FY19E P/ABV).
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