Buy ICICI Bank; tgt Rs 1300: Emkay

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Buy ICICI Bank; tgt Rs 1300: Emkay

The stock is currently quoting at 15.6x FY10E FDPER and 1.5x FY10E ABV. Although, we believe that there are a lot of concerns of the standalone operations of the bank, the stock is available at attractive valuations. Stripping of the value of the subsidiaries, the bank is available at 0.9x FY10E ABV which we find attractive.

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Emkay Research has continued its buy recommendation on ICICI Bank with price target of Rs 1300, in its report dated July 28, 2008.

"ICICI Bank's (ICICI) Q1FY09 operating results were ahead of our estimates driven by better than expected fee income and controlled expense. The strong gains on operational performance were partially set off by higher treasury losses and net profit Rs 7.3 billion was marginally ahead of our expectations. The NII at Rs 20.9 billion, NIM at 2.4%, a growth of 37% in fee income present the robust operating performance of the bank. A slower balance sheet growth (and expanding CASA) has helped the bank to report 50bps expansion in NIMs to 2.4%. We believe that the strategy of transferring the low profitable business of home loans to a subsidiary will help the bank to maintain the margins at current level. Resultantly, the core operating profit took a pole vault as it grew by 73.7% yoy to Rs 23.1 billion. However, the bank has continued to disappoint on the asset quality as the gross slippages continue to rise. However, the gross slippages were at 1.4% of the gross advances, slightly lower compared with 1.6% for FY08. The stock is currently quoting at 15.6x FY10E FDPER and 1.5x FY10E ABV. We maintain our BUY recommendation on the stock with price target of Rs 1,300". 

Valuations: 

"The stock is currently quoting at 15.6x FY10E FDPER and 1.5x FY10E ABV. Although, we believe that there are a lot of concerns of the standalone operations of the bank, the stock is available at attractive valuations. Stripping of the value of the subsidiaries, the bank is available at 0.9x FY10E ABV which we find attractive. We continue with our BUY recommendation on the stock with price target of Rs 1,300".

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