Up target for SIB on better margins, asset quality: Anand Rathi

MUMBAI: Anand Rathi Securities has raised its target price for South Indian Bank on the back of its good performance in the June-September quarter. It has raised its EPS estimates by 6% in FY10 and 6.5% the year after.

���Due to better RoEs, we value the stock at 1.2x 12-month forward ABV (1x earlier) and raise our target price from Rs127 to Rs174. We maintain Buy,��� the brokerage said.

The bank���s second quarter net profit grew 40.4 per cent on a year-on-year basis, driven by higher net interest income growth, greater non-interest income growth and enhanced productivity.

Advances and deposits grew 20.6 per cent and 25.3 per cent y-o-y, respectively. NIM improved 43bps yoy, leading to robust net interest income growth (31.3% y-o-y). The share of CASA was maintained on a quarterly basis at 24%. ���We leave FY10 NII unchanged, but raise the FY11 NII 1.4%,��� Anand Rathi said.

���At our revised target price of Rs174, the stock would trade at 1.1x and 0.9x estimated ABV in FY11 and 12, respectively. Our target is based on the two-stage dividend-discount model,��� it concluded.