Dolat Capital is bullish on ICICI Bank has recommended buy rating on the stock with a target price of Rs 420 in its research report dated May 10, 2020.
Dolat Capital's research report on ICICI Bank
COVID related provisions of `27bn and lower other income led to weaker than expected PAT for ICICI Bank. The disappointment on asset quality was driven by high corporate slippages, led by two overseas exposures. Substantial provisions on these however ensured PCR was sequentially stable. Margins showed healthy trends despite a sequential 500 bps decline in CD ratio. We factor in near-doubling of slippages in FY21E but high contingency buffers of ~`45bn (including all STD asset provisions except for general provisions) and superior PCR limit credit costs to 220 bps, resulting in RoA of 1.1%. While we see weakness in core metrics across the banking sector, ICICI’s strong subsidiary profile and best-in-class liability franchise provide valuation comfort.
We maintain our BUY recommendation and value the standalone bank at 1.5x FY22E ABV, with a SOTP-based TP of ` 420 implying 2.1x of FY22E P/ABV.
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