Buy Federal Bank, target Rs 116: Nirmal Bang Institutional Equities

Nirmal Bang Institutional Equities has a buy call on Federal Bank Ltd. with a target price of Rs 116. The current market price of Federal Bank Ltd. is Rs 85.8. Time period given by the brokerage is a year when Federal Bank Ltd. price can reach the defined target. Federal Bank Ltd., incorporated in 1931, has a market cap of Rs 17155.90 crore.

Investment rationale by Nirmal Bang

We recently met the CEO of Federal Bank (FBL), Mr Shyam Srinivasan and gleaned incremental insight into the performance and outlook for FBL. Given its outlook and FY19E/20E RoE profile of 11%/12.8%, FBL is a prime re-rating candidate, currently trading at 1.1x FY20E P/BV. It may, also, be noted that 4QFY18 results were mispriced by the market. We retain Buy rating on FBL with a target price to Rs116, valuing the stock at 1.5x FY20E P/BV.