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Last Updated : Apr 10, 2018 11:09 AM IST | Source: Moneycontrol.com

Maintain positive view on RBL bank with 25-27% return potential: Sharekhan

"RBL is trading at reasonable valuations of 3.1x its FY2019E book value. We maintain our positive view with a 25-27 percent upside potential," says Hemang Jani, Head - Advisory at Sharekhan.

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Hemang Jani

Head - Advisory, Sharekhan

The Sensex is trading close to 18x its one year forward earnings and is clearly not cheap anymore. The consensus earnings estimates are factoring a 20 percent plus annual growth rate in Sensex earnings over FY2018 to FY2020. Though the revision in earnings of some banks and other adjustment could lead to some downward revision in estimates going forward, the healthy growth in earnings would definitely support equity markets.

Historically we have seen equities have delivered 12-15 percent returns, so if earnings growth improves we are likely to see similar kind of returns. Assuming earning growth of 22 percent and 17 percent respectively for FY19 and FY20, if we assign multiple of 18x then we may see Nifty to reach 11,700. If we assign 17x then we may see Nifty at 11,400.

During Q3FY18, RBL Bank reported healthy performance on account of strong growth in loan book and expansion in NIM. The company has posted good business momentum and is expected to carry on this traction for the next few years.

RBL is trading at reasonable valuations of 3.1x its FY2019E book value. We maintain our positive view with a 25-27 percent upside potential.
First Published on Apr 10, 2018 11:09 am
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