Buy CSB Bank; target of Rs 379: LKP Research

LKP Research's research report on CSB Bank

CSB Bank reported stable numbers in 1QFY24. A strong loan growth (31% YoY, 2.2% QoQ) was reported driven by Gold loans (42% YoY) and comfortable CDR level of 86%. The credit quality recovery (NNPA: 0.32% v/s 1.7% at the end of FY22) was meaningful driven by lower delinquencies and quicker recoveries. A healthy capital position (CAR: 26%), likely to keep the momentum going. Factoring double digit advance growth, stable NIMs and lower credit cost; the bank may post 22% PAT growth in current fiscal year. An attractive valuation (1.1xFY25E Adj. BVPS) makes the stock rewarding factoring FY24E ROA of 1.5%. Hence, we reiterate BUY.

Outlook

The bank is well equipped to report strong return ratios (FY24E ROA/ROE of 1.5%/14.4%) driven by better operating performance, balance sheet growth and improving asset quality. The stock trades at 1.1xFY25E Adj. BVPS of Rs253. We value the bank at 1.5xFY25E Adj. BVPS and arrive at a price target of Rs379; a potential upside of 31%.

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