Buy Jammu and Kashmir Bank; target of Rs 94: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jammu & Kashmir Bank

JKBK's earnings were slightly better than expecatations at Rs526mn (PLe: Rs394mn) but recovery of earnings continues to remain slower as bank undertakes cleaning of legacy stressed assets and enhanced provisioning. Bank saw another quarter of higher slippages mainly from the corporate restructured book & SDR, while also had good upgrades mainly in the slippages from J&K restructured book in Q4FY18. Loan growth was better with margins bouncing back 47bps QoQ helping deliver better NII.  We expect loan growth of 20% in FY19 with slightly better margin on better CASA & focus on J&K book (high yielding) and also decent PCR held.

Outlook

We expect to see gradual earnings trajectory as restuructured book performance has to still playout which remains a risk and credit cost could remain elevated.  We retain BUY with revised TP of Rs94 (from Rs100) based on 1.2x Mar-20ABV.