Buy Karur Vysya Bank; target of Rs 442: Firstcall Research

Firstcall Research is bullish on Karur Vysya Bank and has recommended buy rating on the stock with rating of Rs 442 in its September 22, 2012 research report.

“The Karur Vysya Bank Ltd- the bank that carries with it a tradition of 96 years and yet is young enough to adapt itself to the rapidly changing scenario in the banking industry. The organizational structure has undergone major changes with verticalisation as Business Strategy Group, Operations Group, Risk, Inspection & Audit and HR. The Business Strategy Group is further organized into business segments, such as Personal Banking, Commercial Banking, Corporate & Institutional Banking, International Banking and Treasury & Funds Management. KVB is one of the earliest banks in the country to achieve full networking of its branches under Core Banking Solutions, offering services through alternate delivery channels.”

“The company’s net profit jumps to Rs. 1459.50 million as against Rs. 1167.00 million in the corresponding quarter ending of previous year, an increase of 25.06%. Revenue for the quarter rose 44.78% to Rs. 10055.30 million from Rs. 6945.20 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 13.62 a share during the quarter, registering 17.76% an increase over previous year period. Net Interest Income is Rs. 3582.20 millions as against Rs. 2791.90 millions in the corresponding period of the previous year. Net profit for the first quarter increased by 25.06% on year-on-year basis to Rs.1459.50 mn compared to Rs.1167.00 mn for the corresponding quarter in the previous fiscal. The bank’s operating profit for the first quarter rose by 22.64% and stood at Rs.2026.80 mn from Rs.1652.60 mn in the corresponding period in 2011. Net Interest Income grew by 23.9% year-on-year and stood at Rs.2539.40 mn as against Rs.2049.90 mn for the corresponding period.”

"According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalized Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent. At the current market price of Rs.402.40, the stock P/E ratio is at 7.18 x FY13E and 6.19 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs. 56.06 and Rs.65.06 respectively. Net Income and PAT of the company are expected to grow at a CAGR of 33% and 19% over 2011 to 2014E respectively. On the basis of Debt Equity ratio, the stock trades at 11.64 x for FY13E and 10.86 x for FY14E. Price to Book Value of the stock is expected to be at 1.30 x and 1.08 x for FY13E and FY14E respectively. We expect that the company will keep its growth story in the coming quarters also. We recommend buy in this particular scrip with a target price of Rs. 442 for Medium to Long term investment,” says Firstcall Research report.

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