Buy IDFC First Bank; target of Rs 100 : Motilal Oswal

Motilal Oswal's research report on IDFC First Bank

IDFC First Bank (IDFCFB) reported 1QFY24 PAT of INR7.7b (6% beat, up 61% YoY), boosted by robust fee income and lower provisions. NII grew 36% YoY, while margins moderated 8bp QoQ to 6.33%. Business growth remained strong as the loan book was driven by healthy growth in Commercial Finance and retail loans. The wholesale book was flat YoY. Deposits grew at a healthy 36% YoY, with CASA deposits flat QoQ. Thus, CASA ratio moderated to ~46.5% in 1QFY24. IDFCFB is well poised to deliver healthy loan growth as the drag from the wholesale book continues to moderate. This will be aided by a strong pickup in profitability, due to the replacement of high-cost borrowings, better cost trends, and controlled credit costs.

Outlook

We thus estimate 32% earnings CAGR over FY23-25 and RoA/RoE of 1.3%/13.2% in FY25. We reiterate our BUY rating on the stock with a TP of INR100.