Jhunjhunwala-backed Karur Vysya Bank shares reclaim Rs 100 mark after 4 years, here’s why 

Shares of Karur Vysya Bank hit the three-digit mark after a gap of a nearly 4.5 years today. The stock of the scheduled commercial bank zoomed 9.09 per cent to Rs 100.8, a fresh 52-week high against the previous close of Rs 92.40 on BSE. Karur Vysya Bank shares, which stood at Rs 100 level in the end of February 2018, took 4.5 years to reclaim the three-digit mark. It had been trading below the Rs 100 mark since then. 

The stock, which forms part of late investor Rakesh Jhunjhunwala’s portfolio, has more than doubled in 2022. Jhunjhunwala held 4.50 per cent stake or 3.59 crore shares in the bank at the end of June quarter. It has zoomed 120 per cent this year. 

In a year, the stock has zoomed 90.39 per cent. The midcap stock has climbed 8.57 per cent in a week. Shares of Karur Vysya Bank have been rising for the last three sessions. The rally in the stock comes after the lender announced a stellar set of earnings for the quarter ended September 2022. 

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The Tamil Nadu-based bank on October 20 reported a 52 per cent rise in net profit to Rs 250 crore in the second quarter of this fiscal compared to Rs 165 crore in the corresponding period of FY22.

Operating profit surged 52.53 percent in the September quarter to Rs 572 crore compared to Rs 375 crore during the Q2 of the previous financial year. Net interest income in Q2 also rose 21 per cent to Rs 821 crore in the September quarter against Rs 680 crore in Q2 of the previous fiscal.

Post the earnings, brokerage Anand Rathi turned bullish on the stock with a target price of Rs 115, an upside of 24 per cent. 

The brokerage retained its buy call, valuing it at 0.9x P/ABV on the FY25e book.

“With most of the stress already delinquent/restructured and collections reaching pre-Covid levels, net slippages are expected to be negative in the near term. We estimate the bank’s FY23 GNPA/NNPA at 3.8%/1.3%,” noted the brokerage firm.

HDFC Securities has maintained add stance for the stock post Q2 earnings. 

“Karur Vysya Bank’s (KVB) earnings were in line with our estimates, led by NIM reflation (4.1%) and fee income, partly offset by higher credit costs (1.6% annualised). GNPA declined sharply from 5.2% to 4%, led by accelerated corporate write-offs (4% of loans annualised), while the restructured pool dropped further to 2% of loans (Q1FY23: 2.6%). With levers to reflate yields through MCLR to offset the rising cost of deposits, KVB is gradually gearing itself to deliver the committed credit growth (15% CAGR FY22-25E) and steadily sustaining its core RoAs greater than 1%. We raise our FY23/FY24E earnings estimates marginally to factor in lower credit costs and maintain ADD, with a revised target of Rs 114 (1x Sep-24 ABVPS),” said the brokerage. 

Meanwhile, the stock was trading 8.23 per cent higher at Rs 100 at 2:41 pm today. The stock opened with a gain of 2.16 per cent today at Rs 94.40 today. 

Shares of Karur Vysya Bank are trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. Market cap of the lender rose to Rs 8,049 crore in the afternoon session today. 

Karur Vysya Bank is engaged in providing a range of banking and financial services, including commercial banking and treasury operations. The bank’s segments include Treasury, Corporate/ Wholesale banking, Retail banking and other banking operations.