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Buy Federal Bank; target of Rs 135: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Federal Bank has recommended buy rating on the stock with a target price of Rs 135 in its research report dated May 08, 2022.

May 12, 2022 / 12:57 PM IST
 
 
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Prabhudas Lilladher's research report on Federal Bank


Federal Bank (FB) reported a mixed quarter as PPoP was lower led by NIM and opex miss although asset quality improved leading to lower provisions. Hence earnings at Rs5.4bn (PLe: Rs5.5bn) were largely in-line. Loan growth was a bit soft at 10% YoY led by slower accretion in CoB, BuB and CIB although housing growth was strong. FB is targeting a +15% credit growth in FY23E. Although, NIM was a miss led by agri slippages, it is expected to normalise to 3.25-3.30% as 47% of loans are EBLR linked. Opex is expected to normalise in FY23 and cost to income is guided to reach below 50% by FY24. Asset quality further improved indicating solid underwriting capability.



Outlook


We remain optimistic on FB due to strong credit quality and balance sheet franchise. There is no material change in our FY23/FY24E earnings estimates. Maintain multiple at 1.4x FY24 ABV with TP at Rs135. Retain BUY.

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first published: May 12, 2022 12:57 pm
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