Buy ICICI Bank; target of Rs 284: Khambatta Securities

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26 Aug, 2025 12:21

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Khambatta Securities's research report on ICICI BankICICI Bank‟s reported highly disappointing 3Q FY16 financial results. Higher provisioning for deteriorating asset quality dented the net profit during the quarter; however, net interest income (NII) was in-line with our expectation. During the quarter, bank reported 13.3% y-o-y growth in NII to Rs 54.53 bn against our estimate of Rs 55.01 bn, aided by healthy growth in advances and robust net interest margin (NIM). Advances grew by 15.8% y-o-y while NIM improved by 7 bps y-o-y to 3.53%. In 3Q FY16, bank reported 4.5% y-o-y growth in net profit to Rs 30.18 bn on account of healthy non-interest income. Higher non-interest income protected the operating results. During the quarter, non-interest income grew by 36.4% y-o-y and 40.2% q-o-q to Rs 42.17 bn on back of Rs 12.43 bn profit on sale of 4.0% shareholding in ICICI Prudential Life Insurance Company. Adjusting the profit of Rs 12.43 bn of ICICI prudential, bank reported 4% y-o-y decline in non-interest income to Rs 29.74 bn. During the quarter, fee income reported 7.2% y-o-y growth to Rs 22.62 bn.Considering the pressure on asset quality and net profit, we have revised our target price from Rs 370/share to Rs 284/share, implying “Strong Buy”. At CMP of 230, stock is available at 1.76x FY16E standalone adjusted book value (ABV) of Rs 130 and 1.59x FY17E standalone ABV of Rs 145. Adjusting the subsidiary companies‟ valuation of Rs 66/share, ICICI bank‟s stock is available at 1.25x FY16E ABV of Rs 130 and 1.13x FY17E standalone ABV of Rs 145. Our valuation is based on sum-of-the-parts methodology. The valuation of ICICI Bank standalone is Rs 217/share based on 1.50x FY17E standalone ABV of Rs 145 (Earlier we have valued 303 based on 1.80x FY17E ABV of Rs 169/share) and the valuation of subsidiaries is Rs 67/share (after offering 30% discount). Consequently we arrive at target price of Rs 284/share per share, representing ~ 23% upside. At CMP of Rs 230, we continue with “Strong Buy”.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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