KRChoksey recommended Accumulate rating on Karur Vysya Bank with a target price of Rs 73 in its research report dated July 26, 2019.
KRChoksey's research report on Karur Vysya Bank
Muted balance sheet growth with Advances increasing 3% YoY and Deposits growing 7% YoY. NII at INR 584 Cr. It was almost flat YoY/ (down by 5.7% QoQ). Non-Interest Income was up 5.9% YoY basis (down 0.96% QoQ). Total Income at INR 854 Cr. is up 1.8% YoY/ down by 4.25% QoQ; PPOP at INR 445 Cr. is down by 3.15% YoY/ 4.23% QoQ. The bank has provided for INR 330 Cr. as provisions during the quarter, down by 21.9% YoY/ 6.35% QoQ. Asset quality fell with GNPAs at 9.17%, increasing by 173 bps YoY / 38bps QoQ while NNPAs at 4.94% went up by 44 bps YoY / down 4 bps QoQ. PCR stood at 59.1% for Q1 FY20. PAT at INR 73 Cr. is up 58.8% YoY/ 21.5% QoQ, translating into annualized ROA of 0.4%. Overall, the bank is still reeling under stress from its corporate exposure and a shift towards retail is yet to make any meaningful impact.
We apply a P/Adj.BV multiple of 1.1x to the FY21 adj. BVPS of INR 66 to arrive at a revised target price of INR 73 per share, an upside of 10.4% over the CMP. Accordingly, we reiterate an “ACCUMULATE” rating.
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