Buy RBL Bank; target of Rs 573: HDFC Securities
HDFC Securities is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 573 in its research report dated April 23, 2018.
April 24, 2018 / 05:14 PM IST
HDFC Securities' research report on RBL Bank
RBL Bank (RBK) is India’s fastest growing private sector bank (~59% loan CAGR over FY10-17). It is adequately diversified across geographies and has a reasonable fix on asset quality. Beyond its corporate focus, RBK has selectively ventured into retail segments with high growth potential. With a well capitalised B/S, RBK is set to make the most of receding competition from corporate lenders (esp. PSUs) Strategic clarity, tight execution and superlative growth off a low base make RBK attractive for long term investors. The rising share of high yielding retail loans will fatten NIMs (est. +51bps in FY17-20E). While expanding fee streams and the ability to tweak SA rates are key profit levers, RBK’s high (and well directed) spend on people and technology will limit oplev for now. Our conservative cost and provision estimates still provide upside risk to earnings.
Initiate coverage with a BUY. Our TP of Rs 573 is based on a 3x Mar-20 ABV of Rs 191. RBK’s underperformance (-24% relative to the Bank Nifty over the last year) makes for a good entry point.
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