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Buy Andhra Bank; target of Rs 156: Dolat Capital

Dolat Capital is bullish on Andhra Bank and has recommended buy rating on the stock with a target of Rs 156 in its May 8, 2012 research report.

May 08, 2012 / 05:19 PM IST
 
 
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Dolat Capital is bullish on Andhra Bank and has recommended buy rating on the stock with a target of Rs 156 in its May 8, 2012 research report.


“In FY13, Andhra Bank’s management expects margin to drift by 25-35bps to 3.35-3.45% from 3.67% recorded in FY12; though much lesser incremental loan restructuring and increase in recoveries would aid bottom-line. The bank’s management expects GNPA to drift to 1.8% and incremental loan restructuring of ` 10bn.”


“The management expects RoAA of 1.0-1.1% in FY13. We reiterate our BUY rating on the stock with a revised target price of ` 156 at 1.0x adjusted book value FY14; the stock quotes at 5% dividend yield (at ` 5.5 DPS in FY13) In Q4 FY12, Andhra Bank’s net interest income (NII) grew merely 6% YoY to ` 9bn- 8.7% lesser than our estimates of ` 10bn. Margin declined by 35bps YoY & 47bps QoQ to 3.34% (as against 3.69% in Q4 FY11 and 3.81% in Q3 FY12); a negative surprise. The bank’s core fee income reported healthy growth of 19.2% YoY to ` 734mn, though decline in foreign exchange income and treasury gains resulted into a decline in total other income by 23% YoY to ` 2.3bn which led to lesser than expected operating profit. The bank reported decline in operating profit by 7% YoY & 14% QoQ to Rs 6.6bn (Dolat est: ` 8.6bn). Decline in bank’s NPA provision on YoY basis and absence of any NPV losses in the quarter aided bottom-line. Net profit grew by 8.6% YoY to ` 3.4bn in-line with our and consensus estimate.”


“We revise our earnings estimates by 8% and 11% for FY13 and FY14 respectively and rollover our target price on FY14’s estimates. We maintain our stock rating to Buy with a revised price target of ` 156. At current price, it quotes at 0.85x and 0.76x ABV FY13 and FY14 respectively; based on our target price, the stock would trade at 1.0x adjusted book value FY14,” says Dolat Capital research report.


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To read the full report click on the attachment

first published: May 8, 2012 04:53 pm

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