Buy ICICI Bank; target of Rs 1100: PLilladher

Prabhudas Lilladher is bullish on ICICI Bank and has recommended buy rating on the stock with a target of Rs 1100 in its July 27, 2012 research report.

“ICICI Bank’s Q1FY13 results continues to inspire significant confidence of improving core growth trends and sustenance of robust asset quality in FY13. Loan growth pick up and margin performance has surprised us positively and we, thus, increase our estimates by 3%. With improving fee income trend, we believe ICICI will be able to deliver +25% PPOP growth in FY13 (first +15% PPOP growth since FY08). Despite conservative credit cost assumptions, core ROEs will improve from 11% in FY10 to 15.5-16% in FY14 driving lower valuation discount to peers and thus, ICICI at 1.4x Sep-13 book remains our top pick in Indian Financials.”

“Domestic loan growth surprised, especially the corporate book, with ~27% YoY growth. Retail disbursements were up ~40% YoY and management expects retail book growth of ~15-20% YoY driven by Auto and Mortgages. With a contraction in overseas book ($ growth), we expect ~14% loan growth and see limited risk to our growth estimates. Margin improvement in Q1FY13 has been better than our/consensus expectations and to some extent aided by CRR cut impact. We have inched up our margin expectations to ~2.9- 2.95% and with stronger growth in higher margin domestic business, we see possibility of upside surprises on margins. Core fee income trend has improved from Q4FY12 but still remains muted.”

“We expect pick up from Q2FY13 driven by a low base in large corporate fees (project finance). Also, security receipt losses (Rs1bn) will come off significantly in H2FY13 and aid overall fee growth. Gross NPAs have inched up marginally but slippages levels seem reasonable and credit costs at ~70bps is in line with management guidance and lower than our expectations for FY13. Current restructuring pipeline is also extremely low providing comfort,” says Prabhudas Lilladher research report. 

Institutional holding more than 40% in Indian cos

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