LKP Research is bullish on Bandhan Bank has recommended buy rating on the stock with a target price of Rs 608 in its research report dated October 11, 2018.
LKP Research's research report on Bandhan Bank
Operationally good quarter for the bank, PAT grew by 47% yoy driven by strong loan growth and stable margins. Other income showed flat growth more due to change in the recognition of PSLC income. AUM growth was strong at 51%, margins remained stable at 9% which led to strong NII growth of 55%. On the asset quality side, gross NPAs were stable with marginal decline in the PCR. Valuations of the bank have corrected steeply from 5.6x FY20x ABV and to 3.6x in the wake of RBI’s recent directive for reducing the promoter stake in the bank. Currently, we have kept our estimates unchanged – we expect PAT to grow by 44% to .19.4 bn. ROE & ROA of the bank would remain in the top quartile at 19% and 3.7% by FY20E.
However, in our view, promoter stake sale would be near-term overhang on the stock despite the bank having strong fundamentals in place. Hence, we revise our TP from .760 to 608 (giving target multiple of 4.8 on FY20E ABV), upside of 29% from current levels.
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