Buy IDFC First Bank; target of Rs 98: Emkay Global Financial

Emkay Global Financial is bullish on IDFC First Bank has recommended buy rating on the stock with a target price of Rs 98 in its research report dated October 29, 2023.

Broker Research

November 01, 2023 / 12:27 IST

Buy

26 Aug, 2025 12:21

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Emkay Global Financial's research report on IDFC First Bank

IDFCB continues to report strong growth (25% YoY) and stable margins at 6.3%, led by better asset pricing, but lower other income and sticky operational cost (C/I ratio at 72%) caused a 7% miss on earnings estimate, with PAT at Rs7.5bn/RoA of 1.2%. Bank has recently raised capital via QIP (150bps on RWA) and should thus help contain funding cost, which would stabilize margins. However, checking run-away cost is paramount for sustaining higher RoA delivery. Also, amid rising stress in unsecured loans, we believe Bank needs to closely monitor any sign of stress and build sufficient specific provision/contingent buffer to limit future impact on the P&L.

Outlook

Factoring-in the relatively sticky operational cost and higher LLP amid rising stress in unsecured loans, we cut FY25/26E earnings by 7/16%, but expect the bank to deliver healthy RoA/RoE at ~1.3-1.4%/11-14% over FY24-26E (accounting for the recent capital raise) vs. 0.3-1.1%/3-10% over FY21-23. We retain BUY on the stock, with revised TP of Rs98/share (Rs96 earlier), rolling forward on 1.8x Sep-25E ABV (earlier, 1.7x Jun-25E ABV).

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