Buy Andhra Bank; target of Rs 120: Motilal Oswal

Brokerage house Motilal Oswal is bullish on Andhra Bank and has recommended buy rating on the stock with a target price of Rs 120, in its research report dated April 28, 2015.

August 03, 2015 / 16:25 IST

26 Aug, 2025 12:21

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Motilal Oswal's report on Andhra Bank

Andhra Bank’s (ANDB) 4QFY15 PAT was at INR1.9b (2x YoY on a lower base), driven by healthy NIM (3.5%, 12 quarter high), strong loan growth (+17% YoY) and lower credit costs (1.6% vs. 2.5% in 4QFY14).

Slippages during the quarter declined to a 4 quarter low of INR7.7b vs. INR9b in 3QFY15. Agriculture GNPA declined 20% QoQ to INR10.6b led by strong recoveries (INR3b+ in 4Q) in AP/Telangana. Management is confident of recovering another INR5-6b over the next couple of quarters (Agri NPA target of 3% by 2QFY16 vs. 5.2% currently and 7.2% in 1QFY15).

Bank continued to report healthy NIM (3.5%, +5bp QoQ) led by interest write-back on Agriculture NPA recoveries (INR300m) from AP/Telangana. Management guided that the margins would remain at similar levels over the next few quarters.

"Declining trend in slippages and zero restructuring pipeline were the key positives. Over FY13-14, ANDB's earnings were severely hit due to rising NPAs and further impacted in 1QFY15 due to a spike in Agriculture NPAs. With clarity emerging on the farm loan waiver scheme and management’s focus on recoveries, we believe earnings would improve gradually going forward (INR5b+ of interest write-back and upgrade/recoveries of INR5-6b Agri related NPAs). We expect RoA/RoE to improve to 0.7%/14% by FY17E led by normalized tax rate and healthy margins. Maintain Buy with a TP of INR120 (0.6x FY17E BV)", says Motilal Oswal research report.