South Indian Bank shares gain for three straight sessions; what should investors do?

Shares of South Indian Bank Ltd rose nearly 4% in early trade today after the brokerage Geojit assigned a target price of Rs 21, a 22% upside to the market price of Rs 17.3. The stock has gained 12.28% in the last three sessions. The stock opened higher at Rs 19 today against the previous close of Rs 18.90 on BSE. It hit an intraday high of Rs 19.60, rising 3.7% in early deals on BSE.

The banking stock has risen 138% in one year and gained 1.54% since the beginning of this year. The share has climbed 14.31% in a month. Total 66.03 lakh shares of the firm changed hands amounting to a turnover of Rs 12.71 crore on BSE. Market cap of the firm rose to Rs 3,988.76 crore on BSE.

In terms of technicals, the relative strength index (RSI) of the South Indian Bank stock stands at 73.5, signaling it's trading in the overbought zone. South Indian Bank shares have a beta of 0.8, indicating low volatility in a year. South Indian Bank shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Abhijeet from Tips2trades said, "South Indian Bank is overbought on the Daily charts with strong resistance at Rs 18.9. Investors should book profits at current levels as a daily close below support of Rs 17.5 could trigger a fall till Rs 14.4."

Gaurav Bissa, VP, InCred Equities said, "South Indian Bank has witnessed a strong breakout from the symmetrical triangle pattern on daily charts with strong volumes. The stock is witnessing strong follow up volumes as well implying the breakout can result in a strong upside in the coming weeks. The stock has given breakout on RSI as well along with bullish MACD crossover, both of which support the postulate of a robust upmove in a short while. The stock has also triggered buy signal on ichimoku studies suggesting the stock may be starting a fresh uptrend. The stock can test Rs 23-25 levels in some time with strong support seen at Rs 17 level."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has witnessed a strong pullback in the last two sessions with huge volume participation improving the bias maintaining above the significant 50EMA level of Rs 16.50 and further rise is anticipated till Rs 21.50 zone with near-term support visible near Rs 17.80-18 levels. The overall bias looks positive and a decisive breach above Rs 21.50 is necessary to carry on the momentum still further ahead indicating a breakout."

Sonam Srivastava, Founder at Wright Research, investment advisory firm said, "Over the past month, the stock has experienced a growth of 14%, and it has seen a significant increase of 30% from its lowest point in March. The bank possesses a favourable valuation score and maintains strong financial health. Its earnings are expected to grow at a rate of 14.26% per year, building upon an impressive growth of 1630.3% over the past year. South Indian Bank has outperformed both the Indian Banks industry and the Indian Market in terms of returns over the past year. Analysts suggest target prices that show an upside potential ranging from 13.43% to 22%. However, in the event of a reversal in the trend, the stock price could decline to Rs 15 or Rs 13.75. We regard South Indian Bank as a promising momentum stock within the banking industry, showcasing consistent progress. Interestingly, South Indian Bank also forms a part of our momentum portfolio."

Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One Ltd said, "South Indian Bank has witnessed a huge spurt in price-volume in the last couple of trading sessions and surged nearly 12 percent in the week. On the technical front, the stock is placed at the crucial hurdle of the Rs 19-19.50 zone, and sustainable buying could only lead to a further northward journey toward the Rs 21-22 zone. On the flip side, the immediate support is placed around Rs 18.20-18, followed by the bullish gap of Rs 17.50-16.90."

The stock can rise up to 22% to Rs 21, Geojit said on May 31. The market price stood at Rs 17.3. Since then, the stock has been trading in the green.

“Supported by strong growth in advances, improved asset quality, and higher margins, the bank has reported sharp growth in earnings. PAT stood at a record high of Rs 334 cr. Asset quality improved with GNPA/NNPA at 5.14%/1.86%. However, the new book, which constitutes 58%, has shown very low slippages, providing confidence in further improvement. Hence, we upgrade our rating to BUY with a target price of Rs 21.0 based on 0.6x FY25E Adj P/BV,” said Geojit.

In a related development, the lender on May 31 finalised the candidates for the post of MD and CEO. The bank will submit the application to the RBI seeking approval for the same.

On May 12, the lender reported its Q4 and annual earnings.

Net profit rose 23 per cent to Rs 333.9 crore (highest ever) in the March quarter against Rs 272 crore in the corresponding quarter last year. Net interest income climbed 43.4 per cent on-year to Rs 857.2 crore against Rs 597.7 crore in the corresponding quarter last year. Provisions and contingencies fell to Rs 38.99 crore in Q4FY23 against Rs 77.71 crore in Q4FY22 and Rs 41.43 crore in Q3FY23.

The board recommended a dividend of Rs 0.30 per equity share with a face value of Re 1 each for the year ended on March 31, 2023.

Gross NPAs came at 5.14% and net NPAs stood at 1.86% for the March 2023 quarter --- compared to 5.90% and 2.97% in the same period a year ago.

ICICI Securities on May 14 assigned a target of Rs 23 post Q4 earnings.

“The stock is inexpensive at 0.5x FY25 ABV and 4.3x FY25 EPS for 11.5% RoEs and >13.6% CET 1. We value the stock at 0.7x FY25 ABV, in line with expected RoAs and arrive at our revised target price of Rs 23 (vs Rs 25 earlier). Maintain BUY. Key risk is hiccups, if any, in MD & CEO succession,” said the brokerage.