Arihant Capital recommended hold rating on Bandhan Bank with a target price of Rs 528 in its research report dated July 22, 2019.
Arihant Capital's research report on Bandhan Bank
Bandhan Bank started financial year FY20 with an impressive set of numbers surpassing our estimates on all fronts. PAT grew by 46% yoy to Rs 701 cr vs. our estimate of Rs 591 cr, led by strong credit growth, stable margins and controlled cost. Loans (on book + off book) surged by 39% yoy while micro loans grew by 40%. Non-micro assets growth was at 36% yoy. Liabilities of the bank are gaining more traction with a deposit growth of 42% YoY. CASA ratio increased to 36.1% from 35.5% YoY, retail deposits to total deposits stood at 76.1%. Margins improved further from 10.3% to 10.5% YoY led by improvement in yields. Asset quality of the bank was stable with a GNPA at 2% flat QoQ. Maintain Hold with a revised target price of Rs 528, giving an upside potential of 5%.
However, the rich valuations (4.6x FY20E & 3.8x FY21E ABV) coupled with the overhang pertaining to the reduction of promoter holding offer limited room for upside at current level. We maintain our Hold rating with a revised TP of 528 based on 4x P/ABV to its FY21E.
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