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

Emkay Global Financial is bullish on RBL Bank has recommended buy rating on the stock with a target price of Rs 225 in its research report dated May 01, 2023.

Broker Research

May 03, 2023 / 12:07 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on RBL Bank

RBL delivered in-line PAT at Rs2.7bn/1% RoA, per guidance, on the back of continued margin uptick (up 27bps QoQ to 5%) and contained LLP. Going forward, the bank has guided for steady improvement in RoA (+10-20bps p.a.)/RoE (100-150bps) over FY24-26E, with clear focus on building itself into a granular retail bank. Credit growth improved to 17% YoY/5% QoQ, mainly led by healthy disbursements in the retail/SME book. MFI disbursements accelerated (up 70% QoQ), leading to 23% YoY growth, while card growth stood at 24% YoY. Bank guides for +20% CAGR over FY24-26E, with retail share at 60-65% and mainly led by growth in core retail portfolios (Card + MFI + BB) and the relatively-new segments of HL/AFH, VF, Gold and MSME. Bank believes that the MFI stress-flow is largely behind, while card portfolio stress remains within acceptable levels. Lumpy wholesale stress, too, is largely behind, and the bank would look for some resolutions in the medium term. Factoring-in the better growth trajectory, margin/fee delivery and lower LLP, we expect the bank’s RoA/RoE to improve to 1.3%/13% from 0.8%/7%, without factoring any capital dilution, which we believe the bank may require to achieve the guided growth trajectory.

Outlook

The stock is currently trading at lower valuations of 0.7x FY24E ABV/0.6x FY25E ABV, largely ignoring the broader recovery and growth potential under the new management. We retain BUY with TP of Rs225/share, based on 0.9x FY25E ABV.

For all recommendations report, click here