Buy RBL Bank; target of Rs 225: Emkay Global Financial

Buy

Emkay Global Financial's research report on RBL Bank

RBL has initiated a clean-up act in 3Q amid rising delinquencies in the MFI portfolio due to imposition of MFIN guardrails, in addition to elevated, though moderating, stress in the card portfolio due to breakup from BAF, leading to higher provisions and thus PBT loss at Rs1.9bn. However, RBL benefited from tax reversal and thus reported negligible PAT at Rs0.3bn. It posted MoM improvement in MFI X bucket collection efficiency at 98.4%, and expects stress to largely peak-out (3+ lenders @19-20%) by 4Q. Thus, the management guides to continual clean-up of and, hence, elevated provisions in 4Q, while it expects to move into FY26 with a relatively clean slate.

Outlook

We trim FY25/26E/27E earnings 33%/12%/7%, building in slower growth/higher LLP, but retain BUY; we cut TP to Rs225 (valuing at 0.8x Dec-26E ABV) vs Rs250 earlier. Valuations remain inexpensive at 0.5x Dec-26E ABV, and we thus recommend RBL for investors ready to trade near-term pain for long-term gain, as the ongoing transformation manifests via a sustained above-1% RoA in the long run.

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RBL Bank - 20012025 -emkay