Shares of Karur Vysya Bank, a Jhunjhunwala portfolio stock, climbed 6 per cent in Monday’s trade to take its gains to 123 per cent year-to-date. Brokerage targets on the counter suggest the stock might have gone up too fast too soon. ICICI Securities has revised its target on the banking stock to Rs 100 from Rs 80, but has downgraded it to ‘Add’ from ‘Hold’ earlier. Kotak Institutional Equities and Antique Stock Broking have targets of Rs 110 each on the stock.
HDFC Securities finds the stock worth Rs 114 while Emkay Global sees it at Rs 125.
The scrip climbed 6.12 per cent to hit a high of Rs 103.90 on BSE. The average brokerage target on the counter at Rs 106, as per publicly available data with Trendlyne, suggests no potential upside from here on.
Late Rakesh Jhunjhunwala held 35,983,516 shares, or 4.50 per cent, stake in the private bank at the end of June quarter. Jhunjhunwala passed away on August 14 at the age of 62.
“Given the sharp run-up in the stock (over 75 per cent) in the last 3 months and lack of visibility over return on asset (RoA) reaching historical level of 1.5 per cent, we downgrade Karur Vysya to Add from Buy, with a revised target of Rs 100 from Rs80 earlier, as we increase our PBV multiple to 1 times from 0.8 times earlier on Sep’23 book value per share,” said ICICI Securities.
HDFC Securities said Karur Vysya Bank’s September quarter results were in line with its estimates, led by NIM reflation and fee income, partly offset by higher credit costs. Gross NPA declined sharply from 5.2 per cent to 4 per cent, led by accelerated corporate write-offs while the restructured pool dropped further to 2 per cent of loans, it said.
“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 per cent CAGR FY22-25E) and steadily sustaining its core RoAs at over 1 per cent. We raise our FY23/FY24E earnings estimates marginally to factor in lower credit costs and maintain ADD, with a revised target of Rs 114,” the brokerage said.
Emkay Global said the bank’s business transformational journey, which started during the erstwhile MD’s tenure, has been further accelerated by the current management engaging in lateral hiring from large private banks, for strengthening the liability business.
“Bank has also partnered with Fintechs, to plug operational and outreach gaps on the liability/asset front. We believe this could keep opex elevated, but would bring sustainability to its RoA, unlike in the past,” Emkay said.
The bank recently reported a 52 per cent jump in net profit at Rs 250 crore in the September quarter on a 21 per cent YoY rise in net interest income (NII) at Rs 831 crore. Gross non-performing assets fell to 3.97 per cent of gross advances from 7.38 per cent in the June quarter.
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