Buy South Indian Bank; target of Rs 26: Magnum

Magnum is bullish on South Indian Bank and has recommended buy rating on the stock with a target of Rs 26 in its August 31, 2012 research report.

“South Indian Bank's has declared a decent numbers for the quarter ended June 2012. Although high ROEs of +19%, the recent deterioration in asset quality and continuous challenging operating environment the bank is well poised for growth in coming quarters. Total Business of the Bank stood at Rs. 64,502 crore, recording a Y‐o‐Y growth of over Rs. 10,729 crore (YoY Growth Rate of 20%) in June’12. Deposits at the end of June’12 stood at Rs. 27,349 crore as compared to Rs. 22,151 crore in June’11, registering a growth of 23.5% on Y‐o‐Y basis. Advances recorded a growth of 17.5% (Y‐o‐Y) reaching the level of Rs. 37,153 crore as on June’12 from Rs. 31,622 crore as on June’11. CASA Share in Total Deposits is at 21.09% as at end of June’12.”14BV of Rs 20.70. We have valued the Bank at P/BV of 1.25x FY13E."

“Total Income during Q1FY13 rose by Rs. 324.1 crore to Rs. 1,144.4 crore, registering a YoY growth rate of 39.5%. Other Income increased to Rs. 75 crore during the quarter ended June 2012 from Rs. 51.6 crore in the same quarter last year, a growth of 45.2%. Net interest income jumped 44.4% to Rs 296 crore from Rs 205 crore during the same period. Core Operating Profit grew by 45% to Rs. 207.5 crore during Q1FY13 as compared to Rs. 143.1 crore for Q1FY12, showing an increase of Rs 64.4 crore. Provisions increased by 21.8% on YoY basis to Rs 25.4 crore in Q1FY13 from Rs 20.8 crore in the corresponding period last year. South Indian Bank's net profit shot up by 50% year‐on‐year to Rs 123 crore for the quarter ended June 2012, but it was a marginal increase quarter‐on‐quarter from Rs 121.95 crore.”

“South Indian Bank's first quarter numbers were strong with a 50% rise in profits to Rs 123 crore. Bank has maintained its asset quality at high level. The robust growth in business coupled with few NPAs, had enabled the bank attain its present level of performance. At the CMP Rs 21, the stock is trading at a PE of 5.1 xs and 4.14 xs of FY13E & FY14E EPS and at an adjusted P/BV of 1.01 xs and 0.87 xs of FY13E & FY14BV of Rs 20.70. We have valued the Bank at P/BV of 1.25x FY13E & maintain our buy rating on the stock with a target price of Rs 26.00 with an upside potential of 23% from current levels,” says Magnum research report.

Public holding more than 90% in Indian cos

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