Karur Vysya Bank (TP : ` 512, Buy)
Karur Vysya Bank’s better understanding of clienteles’ business domain and widespread
regional presence are the key strengths. Continued robust credit book expansion and
contained delinquencies have been key outcomes of the bank’s strengths
We expect the bank’s credit book to expand e e pec e ba s c ed boo o e pa d by 28% cagr in FY12-14 much higher than the
industry. Key focus area would be retail trade, SME and agriculture sectors
In Q1 FY13, KVB’s margin drifted by 22bps QoQ to 2.82% on higher cost of funds, however
going forward, moderation in deposit growth and increase in credit-deposit ratio would protect
erosion in margin. Though, the decline in CASA share remain our near term concern. We
factor margin to drift by 26bps to 2.62% (on yearly average basis), as a conservative stance
We expect GNPA to hold in the current level even as the marginal pressure on asset quality
would be mitigated by higher recoveries and upgradations
At current price, the stock quotes at 1.4x 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
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