Buy ING Vysya Bank; target of Rs 408: Magnum

Magnum is bullish on ING Vysya Bank and has recommended buy rating on the stock with a target of Rs 408 in its August 27, 2012 research report.

"ING Vysya Bank , PCR above 90%, stable NIM and lower Cost Income ratio, the management has guided to keep NIM stable going forward at 3.25% in FY13. The bank has shown consistent and steady performance over the past few quarter with strong hold on asset quality and commendable NIMs. At CMP Rs. 371.00, ING Vysya Bank is trading at earnings of 9.66x and 8.77x FY13E and FY14E EPS and a P/B multiple of 1.27x its FY13E BV of Rs. 291.00 and 1.14x its FY14E BV of Rs. 326.00. We value the bank at its 4‐Year average P/BV multiple of 1.4x on its FY13E BV of Rs. 291.00 and reiterate BUY rating on ING Vysya Bank with a target price of Rs 408.00 in near term.”

“Total Income during Q1FY13 rose by Rs. 331.1 crore to Rs. 1,342.4 crore, registering a YoY growth rate of 32.7%. Other Income increased to Rs. 171 crore during Q1FY13 from Rs. 140.4 crore in Q1FY12, a growth of 21.7%. Interest Income rose by 34.5% to Rs 1,171.4 crore from Rs 870.8 crore during the same period. As the Bank has stated in the previous quarter that they expect the Cost Income ratio to further decline and at par (50%‐51%) with industry in next 2‐3 years."

"Management has made a significant progress in controlling the expense and cost income ratio has improved to 57.7% from 63.5% resulting in a considerable increase in operating profit growth of 48.1% to Rs. 217.5 crore during Q1FY13 as compared to Rs. 146.8 crore for Q1FY12, showing an increase of Rs 70.7 crore. Provisions were increased 329.6% on YoY basis to Rs 26.7 crore in Q1FY13 from Rs 6.2 crore in the corresponding period last year. ING VYSYA Bank's profit after tax grew by 38.4% year‐on‐year basis to Rs 130.1 crore in the April‐June quarter of FY13.”

“Management indicated that they were facing challenges due to the interest rate scenario in the country. However a drastic change in the interest rate scenario will help them pick up margins. A marginal exposure to stressed sectors like Textiles and Power should allay concerns over the asset quality. The bank has shown consistent and steady performance over the past few quarter with strong hold on asset quality and commendable NIMs. Hence we revise our PAT estimates by 4% and 5% each for FY13 & FY14. At CMP Rs. 371 ING Vysya Bank is trading at earnings of 9.66x and 8.77x FY13E and FY14E EPS and a P/B multiple of 1.27x its FY13E BV of Rs. 291 and 1.14x its FY14E BV of Rs. 326."

"We value the bank at its 4‐Year average P/BV multiple of 1.4x on its FY13E BV of Rs. 291 and reiterate buy rating on ING Vysya Bank with a target price of Rs 408, an upside potential of 10% from current levels,” says Magnum research report.

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