1. Stock market outlook
The current market price of the stock is Rs 32.25 and its 52-week high was Rs 62 each while its 52-week low was 28.95 each. Geojit Financial recommended investors to buy the stock with a target price of Rs 39 each and an upside potential of 21%.
|Current market price||Rs 32.25|
|Target price||39 rupees|
|52 week high||62|
|1 year return||-40.5%|
2. Decrease inherited surplus to drive growth
The bank had realigned the loan portfolio to reduce the high infra portfolio and to add more retail books. This resulted in slower loan growth of 6% in FY19-22. The Bank successfully provided all legacy loans to distressed businesses and infrastructure and the share of infrastructure loans fell from 9.2% in FY21 to 5.2% in FY22 The bank’s gross funded assets increased by 13% year-on-year in FY22 to Rs1,31,951, with the retail loan portfolio increasing by 28% year-on-year to Rs83,740. Management expects the loan portfolio to grow by 20-25% in the future. The bank’s deposits increased by 13% year-on-year to reach 93,214 cros rupees, with the CASA pound increasing by 11%. The bank’s CASA ratio stood at 48.4% versus 51.8% in FY21. The bank’s capital adequacy stands at 16.74% in FY22, compared to 13.77% in FY21.
3. Improved asset quality
The quality of the bank’s assets continued its improving trend in all segments. ARNP was 3.70% versus 4.15% in FY21 (3.96% in Q3FY22) with improved recoveries and economic recovery. Even though the NPA numbers are above desirable levels, keeping the cost of credit high, we expect it to improve over the next few quarters. Management provided guidance on cost of credit of 1.5% in FY23 compared to 2.5% in FY22. EPS in FY22 was 1.53% versus 1.74% in Q3Y22 and 1.86% in Q4FY21. The GPA of the infra book amounts to 21.64% while that of the corporate book (non-infra) amounts to 2.75% and that of the retail and commercial segment to 2.63%. The overall provision coverage ratio stood at 70.3% and collection efficiency exceeded pre-covid levels with the urban retail segment at 99.6%.
4. Outlook and assessment
According to Geojit Financials, “The bank has shown significant improvement on its books by reducing subprime corporate and infrastructure lending and focusing on retail lending. With successful diversification of its portfolio, the bank is poised to focus on strong growth. Other key business metrics including Margins, deposit mix etc. also support positive long-term growth. Although we expect the cost of credit to remain high , it should moderate from the current high levels. We are reducing our earnings estimates slightly to take into account the continued slowdown in economic growth. . With the recent correction, IDFCFB has become an attractive bet for long-term investments. We maintain our buy rating with a target price of Rs.39 based on 1.0x FY24 Adj. BVPS.
5. About IDFC First Bank Ltd
IDFC FIRST Bank was founded by the merger of Erstwhile IDFC Bank and Erstwhile Capital First on December 18, 2018. IDFC Limited was established in 1997 to finance infrastructure, focusing primarily on project finance and raising capital. capital for private sector infrastructure development. The market capitalization is 20,056 crores.
The stock was featured in the Geojit Financial Services brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.