Buy Federal Bank, target price Rs 132: HDFC Securities

HDFC Securities has buy call on Federal Bank with a target price of Rs 132. The current market price of Federal Bank Ltd. is Rs 101.5. Time period given by analyst is one year when Federal Bank Ltd. price can reach defined target.

Federal Bank Ltd., incorporated in the year 1931, is a banking company (having a market cap of Rs 21057.00 Crore).

Federal Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest and Interest On Balances with RBI and Other Inter-Bank Funds for the year ending 31-Mar-2022.



Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 4318.17 Crore, up 3.54 % from last quarter Total Income of Rs 4170.55 Crore and up 4.11 % from last year same quarter Total Income of Rs 4147.77 Crore. The bank reported net profit after tax of Rs 656.30 Crore in latest quarter.

Investment Rationale
Federal Bank’s (FB) Q1FY23 earnings beat estimates on the back of strong loan growth (+17% YoY), incrementally better margins (+6bps QoQ) and negligible treasury losses, resulting in healthy PPOP accretion (+22% sequentially). Overall asset quality improved sequentially, partly offset by slippages from the restructured portfolio, translating into low credit costs (41bps annualised). FB’s FinTech ecosystem partnerships on either side of the balance sheet are focused on driving business productivity (pace of customer acquisition) and greater efficiencies. It raises FY23E/FY24E earnings estimates to factor in higher loan growth and lower credit costs; we maintain BUY, with a revised target price of INR132 (1.3x Mar-24 ABVPS).

Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of 31-Mar-2022, while FIIs owned 26.01 per cent, DIIs 43.25 per cent.