Visit http://indiaer.blogspot.com/ for complete details �� ��
IDBI Bank, Change in trajectory…
IDBI Bank is one of the large public sector banks with 720 branches
spread across India. The bank is repositioning itself as ”Not just for big
boys” but a bank that provides” Banking for all”. Our recent interaction
with the management gives us confidence on much improved operating
matrices (FY12E onwards) after a short period of strategic consolidation
(in FY11E). We expect a shift in trajectory for CASA, NIM, RoA and RoE.
This would command a higher valuation multiple.
New CMD laying the roadmap: primary focus on CASA accretion
New CMD Mr Malla is pushing the competition to accumulate more CASA
deposits by announcing zero charges CASA accounts. CASA was just
13% in Q1FY11. The management has laid down a target of 20% for
FY11E. We believe CASA will be at 18.5% and 22% for FY11E and FY12E,
respectively, (higher than our previous estimate of 14% and 15%,
respectively) also supported by aggressive branch addition plans for
FY11E at 270+. We expect 17% CAGR in both advances and deposits
over FY10-12E to Rs 188822 crore and Rs 228517 crore. This would lead
to an improvement in NIM to 1.8-1.9% by FY11E and above 2% for
FY12E.
Return matrix to improve - Valuation multiple gets re -rated
The bank delivered RoA of 0.5% and RoE of 12% in FY09 and remained
flat in FY10. Now, after strategic development, it is likely to shift to a
higher path where we see RoA of 0.7% and RoE of 14% (after considering
dilution of 53% in FY11). This would lead to a re rating of the valuation
multiple to the core business of the bank. On the other hand, the
investment portfolio of the bank (listed and unlisted) requires a closer
look. Overall, we are positive on the outlook of the bank.
Valuation
The bank is in a phase of consolidation and the operating matrix is
expected to show a positive improvement. We are valuing the core
business of the bank at 1.5x FY12E ABV and ascribing Rs 40 to its
investment book. Hence, we have a fair value target of Rs 206.
Technical outlook
• The stock is in strong uptrend and continues to form higher top higher
bottom on the daily chart
• On the weekly chart the stock gave a strong volume led breakout
above the sideways consolidation range in late September 2010 and
has ventured into unchartered territory above the previous all time
highs of Rs.181 levels recorded in November 2007
• Short term and near term moving averages are acting as cushion on
every corrective decline and indicate strength in the current uptrend.
The MACD oscillator is trending up and is placed in positive territory
on weekly charts indicating strength
No comments:
Post a Comment