Buy Andhra Bank; target of Rs 136: KRChoksey

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Buy Andhra Bank; target of Rs 136: KRChoksey

KRChoksey is bullish on Andhra Bank and has recommended buy rating on the stock with a target of Rs 136 in its February 6, 2012 research report.

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RELATED NEWS Buy Punjab National Bank; target of Rs 1275: Motilal Oswal Buy ICICI Bank; target of Rs 1100: Motilal Oswal Buy Indian Overseas Bank; target of Rs 122: Dolat Capital ALSO READ See previous views by KRChoksey See what other Experts & Brokerages are saying about Andhra Bank See messages about Andhra Bank Andhra Bank BSE | NSE 31/05/12 Are Mutual Funds betting on Andhra Bank?

KRChoksey is bullish on  Andhra Bank and has recommended buy rating on the stock with a target of Rs 136 in its February 6, 2012 research report.

"Andhra Bank reported muted a net profit of Rs 303 crore which is down 8.4% y-o-y & 4.2% q-o-q led by higher provisions. Net interest income accelerated by 17.1% y-o-y and 3.4% sequentially to Rs 984 crore, in line with our estimate. Advance growth outpaced deposit growth as a result CD ratio stood at 79.2%, 39bps higher q-o-q while NIMs remained flat q-o-q to 3.81%. Strong traction in non-interest income was boosted by healthy core fee income. Core operating profit ex. treasury profits continued to grow at a very healthy pace of 23% y-o-y to Rs 767 crore. The bank has restructured loans amounting to Rs900 crore while slippages were Rs388 crore (2.1%). Provisions went up 18.7% q-o-q driven by one time NPV loss provision on incremental restructuring of Rs900 crore. Deposits and advances growth were 4.5% q-o-q & 5.0% q-o-q during the quarter. CASA ratio stood at 26.6%., up 46bps q-o-q. Upgrade BUY."

"Net interest income grew 17.1% y-o-y to 984 crore driven by 5.0% q-o-q growth in loans book and steady NIMs. Net interest margin stood at 3.81%, will likely to moderate ~ 10-15bps in coming quarters given the higher proportion of wholesale loans and lower CASA ratio. Non- interest income was spurred by strong traction in core fee income. Treasury gains continued to be tepid at Rs 16 crore against Rs 22 crore in the previous quarter. Higher loan processing fees, forex income and locker rents led strong growth in core fee income. We expect fee income to grow modestly at 14.1% CAGR over FY11-FY13. Total operating expenses was contained at Rs 452 crore, driven by stable employee cost and other opex, in line with our estimates. As a result, cost to income ratio marginally improved to 37% during the quarter."

"Andhra Bank performed reasonably well in tough macro environment during the quarter. Healthy NII, strong traction in fee income and muted OPEX growth were partially offset by higher provisions which resulted into muted bottom line. Strong and resilient margin, comfortable provisioning coverage and above the systemic credit growth, new management's focus on improve fee income profile and effective credit monitoring will be the key drivers for the bank, going forward. Currently stock is attractively trading at 0.9x P/ABV on FY13e book. We have revised upward our FY13 earnings by 6.8% factoring lower provisions. We upgrade our investment rating on the stock from HOLD to BUY with target price of Rs 136," says KRChoksey research report.  

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To read the full report click on the attachment