Buy Karur Vysya Bank; target of Rs 265: 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 265 in its research report dated August 22, 2024.

Broker Research

August 23, 2024 / 20:45 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

Asit C Mehta' report on Karur Vysya Bank

We initiate coverage of Karur Vysya Bank (KVB) with a “BUY” recommendation and a target price of Rs 265, valuing the bank at 1.7x of its 1 year forward P/Adj. BV. The bank’s retail and MSME loan books are growing at a healthy pace, mainly as a result of initiatives taken by the bank in the respective segments (NEO, SBG and TBG). The bank’s increasing footprint in the retail lending segment shall lead to an increase in retail deposits which shall aid in the bank’s CASA ratio. Karur Vysya expects to see a higher proportion of retail loans in its asset mix in the estimate which could act as one of the catalysts to drive margins. The MSME book of the bank remains granular with an increase in average ticket size and growing customers within the turnover of Rs 50mn–100mn and over Rs 100mn. The bank is looking to expand beyond the state of Tamil Nadu by collaborating with a few major NBFCs via a co-lending agreement. Also, the asset quality remains robust as the bank is seeing low slippages along with higher recoveries.

Outlook

We expect the bank loan book to expand at a CAGR of 16.3% over FY24–27E (19.7% CAGR, excluding corporate loans) while margins improving to 4.4% in FY27E. We estimate its NII/PAT to expand at a CAGR of 18%/25% over FY24–27E. We value the bank at 1.7x of its Q2FY25E P/Adj. BV to arrive at a target price of Rs 265 and initiate coverage with a BUY rating.

For all recommendations report, click here