Financials - TOP PICKS
Karur Vysya Bank (TP : ` 512, Buy)
Continues to be ranked amongst the best managed private banks in India, demonstrating right mix
of growth across key variables over sustained period of time — asset growth (28% CAGR over
FY07-12), profitability growth (26% CAGR over FY07-12)
In particular, we like the management stance to play to its strength on its better understanding of
local regions and clientele drive quality credit growth. That reflects well in the business growth of 28-
34%, significantly higher than the industry average over the last couple of years, while GNPAs have
declined from 2.8% in FY07 to 1.3% in FY12
On liability side, continuous focus on brick & mortar branch banking strategy and best of the class
product offerings have led to CASA deposit share at 19% even as the balance sheet shown a
consistent growth
While margins during FY12 dipped by 28bps on higher cost of funds, however the earnings
continued their growth on account of cushion from high PCR of earlier years. During FY12, this
came off to 75% as the bank derived advantage of high provisions made in previous years
Hence, the decline in CASA deposits as a share of total deposits remain our near term concern. We
are building dip in FY13 interest margins by another 26bps, as a conservative stance. We expect
GNPAs to hold in the current range even as the marginal pressure on asset quality during FY13 is
mitigated by the recoveries and upgrades
At current price, the stock quotes at 1.5x and 1.3x adjusted book value (ABV) FY13 and FY14
respectively. Based on our price target of ` 512, the stock will trade at 1.8x and 1.6x ABV FY13 and
FY14 respectively
��
No comments:
Post a Comment