ICICI Direct is bullish on Bandhan Bank has recommended buy rating on the stock with a target price of Rs 650 in its research report dated July 22, 2019.
ICICI Direct's research report on Bandhan Bank
The operational performance continued to remain strong with NII growth of 36% YoY to Rs 1410 crore, led by healthy credit growth of 39% YoY. Margins expanded~18 bps YoY but sequentially declined 24 bps to 10.45%. Robust traction in other income continued at a healthy pace of 48% YoY to Rs 312 crore, attributable to revenue from sale of PSLC. Post higher provisions in Q3FY19 in lieu of IL&FS, provision normalised with credit cost at ~28 bps. Steady credit cost coupled with strong operating profit of 47% YoY to Rs 1208 crore continued to aid robust PAT growth of ~46% YoY to Rs 701 crore. This was well above our estimate of Rs 657 crore.
Outlook
However, given recent headwinds in home finance sector, balance sheet growth trajectory is seen getting impacted. Factoring in the risk, we lower our multiple to 26.5x FY21E EPS (Rs 24.5 per share). Subsequently, our target price is Rs 650 (earlier Rs 725). We maintain our BUY recommendation on the stock.
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