Buy ICICI Bank; target Rs 1200: P Lilladher
Prabhudas Lilladher is bullish on ICICI Bank and has recommended buy rating on the stock with a target price of Rs 1200 in its October 26, 2012 research report.
November 03, 2012 / 12:58 IST
Prabhudas Lilladher is bullish on ICICI Bank and has recommended buy rating on the stock with a target price of Rs 1200 in its October 26, 2012 research report.
ICICI Bank’s Q2FY13 results continue to inspire confidence of improving core growth trends, with PPOP growth expected to exceed 25%. Asset quality remains comfortable, with ICICI absorbing Rs4bn charge on Deccan Chronicle without impacting P&L which provides comfort on management guidance of 75bps credit costs, despite some lumpy corporate exposures. With strong H1 performance and management delivering on their guidance, we increase our multiple on lending book to 1.9x FY14 book and increase TP to Rs 1,200/share (13% upside). 10% higher valuations to historic mutiples is warranted by higher ROEs but any further upgrade will be contingent upon improvement in overall growth outlook or clarity on Infra issues.ICICI has delivered a PPOP growth of ~35% YoY for last three quarters, largely driven by NIM expansion and improving growth in the domestic book. Management continues to guide ~3.0% NIMs but with some one-offs impacting overseas NIMs in Q2FY13, we expect ICICI could further surprise on margins. Retail momentum continues to pick up with 14% YoY growth and we see limited risks to our 15% overall growth assumption. The only negative remains flat core fee performance and outlook remains challenging but significant reduction in SR losses (Rs4bn in FY12) will aid noninterest income.Adjusted for Deccan recognition, NPA performance improved (Rs7bn slippages v/s Rs8.7bn in Q1FY13). Credit costs at ~75bps despite Rs4bn provision on Deccan was a positive surprise. We factor in ~90bps credit costs v/s management guidance of 75bps as we believe risks still remain from lumpy corporate exposures as the reform process has still not addressed power fuel/pricing issues.We marginally adjust earnings and increase our PT to Rs1,200/share on a rollover + higher book multiple for the lending business at ~1.9-2.0x FY14 book. Our multiple is based on ~10% premium to historic book justified by better ROE profile but further re-rating will require (1) further improvement in growth outlook and (2) some clarity/govt. action on power issues. Buy the stock for the target of Rs 1200," says Prabhudas Lilladher research report.Public holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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