PremiumScheduled commercial bank, Karur Vysya Bank is a smallcap stock trading below ₹100 currently. The stock is just a couple of rupees away from hitting its 52-week high. On Tuesday, Karur Vysya witnessed buying sentiment despite the broader markets being bearish. This is due to the strong set of numbers the bank garnered in the second quarter of FY22. The stock has nearly doubled this year and even emerged as a multi-bagger. On the back of its impressive Q2 numbers, experts have given a buy rating on the stock with a target price of ₹115 to ₹125 ahead. Late Rakesh Jhunjhunwala is one of the major investors in this stock.
On BSE, Karur Vysya Bank shares closed at ₹92.40 up by 0.82%. The stock had touched an intraday high of ₹93.65 apiece. The stock is away by a couple of rupees from clocking a 52-week high of ₹96.20 apiece. Its current market cap is around ₹7,393.27 crore.
So far this year, the stock has skyrocketed by 100% on Dalal Street. The stock was near ₹46.2 level at the start of January this year. However, in a year, the stock rose by over 82% from its level of ₹50.65 on October 25, 2021.
Jhunjhunwalas are investors in Karur Vysya Bank since December 2015.
As of June 30, 2022, late Rakesh Jhunjhunwala held 3,59,83,516 equity shares or 4.5% in Karur Vysya Bank. Rakesh died on August 12, 2022. However, his estate including shares and property is passed on to his family. Karur Vysya Bank is still in the Jhunjhunwala portfolio.
As per Trendlyne data, as of October 25, 2022, Jhunjhunwala's holding in Karur Vysya Bank is around ₹333 crore.
The Tamil Nadu-based bank garnered a net profit of ₹250 crore in Q2FY23 rising by 52% yoy, while net interest income stood at ₹821 crore up by 21% yoy. Net interest margin improved to 4.07% during Q2 of FY23.
During the quarter, the bank's credit portfolio surged by 15% yoy taking its advances at ₹61,846 crore. It said that credit off-take continues to improve both yoy and qoq terms aiding the growth of the advances portfolio. The lender's jewel loan portfolio rises by 15% yoy to ₹15,465 crore.
Meanwhile, the bank's deposits stood at ₹73,614 crore up by 13% yoy in Q2FY23. CASA deposits gained by 11.89% to ₹25,913 crore.
Asset quality improved with gross NPA coming at 3.97% in Q2FY23 versus 7.38% in Q2FY22 and 5.96% in Q1FY23.
Analysts at Emkay Global in their report said, "Bank’s business transformational journey, which started during the erstwhile MD’s tenure, has been further accelerated by the current management engaging in lateral hiring from large private banks, for strengthening the liability/asset business. Bank has also partnered with Fintechs, to plug operational and outreach gaps on the liability/asset front. We believe this could keep opex elevated, but would bring sustainability to its RoA, unlike in the past."
Further, the analysts note added, "Factoring-in better than expected growth, margin trajectory and asset-quality outcomes, we upgrade our earnings for FY23-25E by 5-13% and expect RoA/RoE at a high of 1.3%/15% in FY25E, seen only prior to 2013. Thus, we upgrade our P/ABV to 1.0x from 0.8x, we retain Buy on the stock with revised TP to Rs125/share (vs Rs95)."
Also, in a report, analysts at Anand Rathi said, "KVB’s Q2 FY23 profitability improved, its RoA coming at 1.16% (up 30bps y/y) on account of a good operating performance. Key positives for the quarter were 1) moderating slippages, 2) pick-up in credit growth (many-year high), 3) better margins and 4) strong liquidity and capitalisation. With credit growth expected to be in the mid-teens and moderating credit costs, earnings are expected to be strong. We retain our Buy rating, with a TP of Rs115, valuing the stock at 0.9x P/ABV on the FY25e book."