Cholamandalam Securities is bullish on South Indian Bank has recommended buy rating on the stock with a target price of Rs 36 in its research report dated October 12, 2017.
Cholamandalam Securities' research report on South Indian Bank
SIB’s Loan book grew steadily (11.9%YoY, 5.2%QoQ) to INR 497.2bn in 2QFY18 led by growth in Retail (22.3%YoY, 2.6%QoQ) and SME & Agriculture (16.2% YoY, 10.6% QoQ) segments. In-line with past management commentary, corporate book remained in consolidation mode (grew 1.9% on a sequential basis). Management has guided to grow its overall loan book at ~18% in second half of FY18, primarily lead by retail and SME segment. • Growth in retail segment was led by Service and Traders segment (34.6%YoY) & Manufacturing segment (31.4%YoY) whereas Gold loan showed de-growth of 7.8% YoY. Management continues to focus on segments like Retail, SME & Agri and is looking to avoid large ticket size consortium lending.
The bank continues to shift its focus from corporate loans towards Retail & SME loans which would help them contain the credit costs and maintain the margins at healthy level. The Stock currently trades at 0.9x PBV of FY19E. We maintain our BUY rating for the stock and the target price at INR 36, implying a 1.2X P/B FY19E. Risk: Tougher ramp up of retail loan book; fresh big ticket slippages from loan book.
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