Buy ICICI Bank; target of Rs 365: Prabhudas Lilladher

Prabhudas Lilladher's research report on ICICI Bank

ICICIBC moved back to profit of Rs9.1bn (PLe: Rs4.5bn) which was better than expectation on (i) better NII growth of 12% YoY led by 11bps margins improvement and (ii) lower provisions requirement on much lower slippages. Asset quality improved on multi quarter low slippages & decent recovery/upgrades with coverage improving to 59.5% up 470bps QoQ. BB & below book which is the tracked stressed book is at 4.0% of loans (2.9% excl. <1.0bn exposures) which has come off from 4.8% of loans on material upgrades. We believe, recoveries/upgrades to slowly improve asset quality with quality coverage ratio, while should face limited risk on large slippage. Other metrics like CASA mix, fee growth and controlled opex remain positive but quality of loan book on granularity is yet to take place.

Outlook

Bank trades at 1.4-1.5x core book which is discount to large peer and is undemanding as management overhang is out, hence we upgrade to BUY (from Accumulate) with revised TP of Rs365 (Rs328) based on Sep-20 ABV & SOTP.