Emkay Global Financial's report on Bandhan Bank
We believe that MFIs will be early beneficiaries of the unlocking of economy, which is reflecting in their improving collection trends (>70-80%). Bandhan too has indicated collection efficiency of over 80% and should rise up to 90% by Oct’20 with possibly business as usual by Dec’20. Based on past experience during the regime change in 2011, management expects the impact, if any, of WB state elections in early CY21 to be limited and manageable. The bank has built a strong Covid-19 provisioning buffer of ~190bps (ex-normal std provisions ~40bps) and plans to proactively build such contingency buffers to deal with future eventualities on the back of its strong PPoP, supported by healthy NIMs and subsiding operational cost.
Outlook
Amid improving collection trends and recent stock correction post promoter OFS to meet regulatory requirement, the stock is reasonably valued at 1.8x Sep’22E ABV and provides a decent upside to our TP of Rs390, based on 2.7x Sep’22E ABV).
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