Buy ICICI Bank; target of Rs 420: Choice Broking

Choice Broking's report on ICICI Bank

Business outlook of ICICI Bank Ltd. (ICICIB) looks sanguine as assets quality pain peaked out and the bank is at the end of recognition of stress assets cycle. Higher PCR at 59. 5 % by Q 2 FY 19 and easing of uncertainty over management issue with the appointment of new CEO provides comforts on business perspective. As per the management, the worst of loan rating downgrade cycle is over which indicates that slippage is likely to reduce in coming quarters. GNPA ratio improved to 9. 45 % in Q 2 FY 19 v/s 10. 0 % in Q 4 FY 18. ICICIB is also showcasing sequentially improvement in business growth as well as in profitability. Furthermore, the prevailing crises in NBFC sector provides opportunity for ICICIB given the strong capitalization level and extended liability franchise across rural as well as urban areas of the country.

Outlook

We maintain our ‘Buy’ rating on the stock with upward revision in potential price. Our recommended potential price is Rs 420 determined after valuing ICICIB’s standalone business at Rs 344 per share (P/ABV at 2. 2 (x) to FY 20 E adjusted BVPS at Rs 156. 6 ) and adding Rs 76 of ICICIB’s subsidiaries valuation.