Buy Karur Vysya Bank Ltd; target of Rs 275: Asit C Mehta

Asit C Mehta is bullish on Karur Vysya Bank has recommended buy rating on the stock with a target price of Rs 275 in its research report dated January 21 2025.

Broker Research

January 21, 2025 / 13:43 IST

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Asit C Mehta report on Karur Vysya Bank Ltd

Karur Vysya Bank (KVB) reported its Q3FY25 results, broadly in line with our estimated pre-quarter numbers and beat on PPOP/PAT. The bank's core portfolio, RAM, continues to grow at a healthy pace (4.2% QoQ/20% YoY) while the corporate segment remains a laggard. Deposits too reported a growth of 3.5% QoQ/15.7% YoY, thus, normalizing the bank’s CD ratio by 24bps QoQ/131bps YoY to 83.5%. During the quarter, the bank saw the increased cost of funds, which capped the upside growth of NIMs at 4% (9bps lower than our estimate). KVB’s asset quality remains pristine as it improved sequentially with declining GNPA/NNPA. The bank expects that GNPA/NNPA going forward will be under 2%/1% due to the high portion of the secured book and prudent underwriting. We expect its advances/deposits to grow at a CAGR of 17%/16.2% over FY24-27E while ROA to sustain at 1.8% along with PAT growth of 20% CAGR during the same period. It is currently trading at 1.6/1.3/1.1x of its FY25/26/27E Adj. BV.

Outlook

We maintain ‘Buy’ on Karur Vysya Bank while revising our target upwards to Rs 275 (from Rs 265 earlier). We value the bank at 1.6x of its FY26E Adj. BV.

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