Hold ICICI Bank: Indiabulls Securities

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Indiabulls Securities Research has recommended a hold rating on ICICI Bank in its report dated June 30, 2009.

"We have valued ICICI Bank's stock by using the sum-of-the-parts methodology. The standalone ICICI Bank has been valued at Rs 485, assuming a 16.24% cost of equity and a 10.4% terminal growth rate. The Bank's overseas banking subsidiaries have been valued at 1.0x its FY10 books, leading to a valuation of Rs 39. ICICI Prudential Life has been valued at a new business achieved profit (NBAP) multiple of 17.5x, which is lower than the industry's average on account of its aggressive growth in the past, which may affect the quality of underwriting. This gives the life insurance business a valuation of Rs 138."

"ICICI Lombard has been valued at Rs 30 by assigning a multiple of 18x to its normalised profit. The AMC has been valued at 4.5% of its AUM, leading to a valuation of Rs 12. We have valued ICICI Securities and ICICI Securities Primary Dealership at Rs 66, based on a target P/E multiple of 18x. This helps us arrive at the consolidated price of Rs 785. Therefore, we give a Hold rating to the stock," says Indiabulls Securities' report.

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