Buy ICICI Bank; target of Rs 1600: Emkay Global Financial

Emkay Global Financial's research report on ICICI Bank

ICICI Bank has noted a superlative performance yet again, with 5% PAT beat at Rs126bn (up 18% YoY; historically superior RoA of ~2.5%), healthy credit growth at 13% YoY, and a sharp 16bps QoQ margin uptick to 4.4%. Overall asset quality improved, with GNPA ratio down by 29bps QoQ to more than a decadal low of 1.7%. The bank continues to hold healthy specific/contingent provision buffer, which we believe should protect its P&L from initial assetquality hiccups, if any. Notwithstanding the expected near-term margin pressure across the sector following the RBI’s consecutive rate-cuts, we believe ICICIB is well positioned to deliver over 2% RoA on the back of better cost management/lower LLP. This, coupled with management credibility vs peers and capital/provision buffers, grants us confidence on the stock.

Outlook

We hence continue to favor ICICIB while upping its TP by ~10% to Rs 1,600, based on 2.6x FY27E ABV (deserving premium over HDFCB@2.5x) and subs at Rs260/sh.