Buy IDBI Bank; target of Rs 111: Magnum

Magnum is bullish on IDBI Bank and has recommended buy rating on the stock with a target of Rs 111 in its August 25, 2012 research report.

“IDBI Bank reported a decent set of numbers for Q1FY2013 with operating profit up by 9.5% on YoY basis to Rs 1,129.1 crore. IDBI Bank reported a flat PBT up by 2.8% due to higher provisioning done in Q1FY13. At the CMP Rs 85.00, the stock is trading at 4.46 x and 3.96 x FY13E and FY14E earnings and at 0.57 xs and 0.53 x P /ABV FY13E & FY14E respectively. We value the Bank at 0.75x FY13E Adj. BV of Rs 148 and hence we maintain our BUY recommendation on the stock with revised target price (TP) of Rs 111.00 (earlier target price Rs 131.00).”
“Net Interest Income (NII) for the quarter ended June 30, 2012 stood at Rs. 1,271 crore as against Rs. 1,152 crore in the corresponding quarter of the previous year, recording a growth of 10%. Non Interest Income (Other Income) for the quarter ended 30.06.2012 is at Rs 517.0 crore as against Rs 430.9 crore for the corresponding quarter of last year, registering a growth of 20%. The income from treasury was strong at Rs44cr (vs. Rs23cr in 1QFY2012). Fee based income for the quarter ended June 30, 2012 increased to Rs. 417 crore as against Rs. 338 Crore for the quarter ended June 30, 2011. Operating Profit increased by Rs 98.3 crore from Rs 1,030.8 crore to Rs 1,129.1 crore registering a growth of 9.5%. IDBI Bank's provisions and contingencies rose 19.1% to Rs 506.82 crore in Q1 June 2012 over Q1 June 2011. IDBI reported a net profit increased by 27.5% to Rs. 427.3 crore for the quarter ended June 30, 2012 as against Rs. 335.1 crore in the corresponding quarter last year.”
“The bank has been among the fastest‐growing banks in terms of CASA deposits over the past few years (CAGR of 35% over FY2007‐12). A relatively weaker deposit base, rising non-performing assets (NPAs) and a lower tier I capital adequacy ratio (CAR; 8.24%) are likely to constrain the business growth going ahead. At the CMP Rs 85.00, the stock is trading at 4.46x and 3.96x FY13E and FY14E earnings, and at 0.57x and 0.53x P/ABV FY13E and FY14E respectively. We maintain our BUY recommendation with revised target price (TP) of Rs 111 (earlier target price Rs 131) valuing the stock at 0.75x FY13E Adj. BV of Rs 148 and regrade our rating due to return ratios (RoE of 10%‐11%) remain lower than that of peer banks and hence are likely to impact valuations of the Bank,” says Magnum research report. Shares held by Central Governments/State Governments 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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