Buy Karur Vysya Bank; target of Rs 185: Emkay Global Financial

Emkay Global Financial's research report on Karur Vysya Bank

KVB continued its upward RoA/RoE drift in 2Q as well, posting a robust 1.6%/17%, despite softening of NIM (4.1% in Q2FY24 vs 4.2% in Q1FY24), mainly led by contained LLP. The bank reported strong credit (gross) growth, at 16% YoY/5% QoQ for Q2FY24, while focus remains on delivering higher profitability as against chasing growth. Asset quality continued to improve, with fall in GNPA ratio by 26bps QoQ to 1.7% and in NNPA to a low 0.5%, as the bank’s PCR increased to 73%. We expect KVB to register its decadal best RoA/RoE, at 1.5%/16% over FY24- 26E, led by healthy NIM/fees and contained LLP.

Outlook

We retain BUY on KVB with revised TP of Rs185/share (vs Rs178), rolling forward to 1.2x Sep-25E ABV. KVB remains our preferred pick in the small-cap banking space, given its superior returns/capital ratios and Management credibility.