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Buy Federal Bank, target price Rs 70: ICICI Securities

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ICICI Securities has given buy rating to Federal Bank with a target price of Rs 70. The share price moved down by 0.38 per cent from its previous close of Rs 52.70. The stock’s last traded price is Rs 52.50.

Federal Bank Ltd., incorporated in the year 1931, is a banking company (having a market cap of Rs 10485.07 Crore).

Financials
The Bank reported a Gross Non Performing Assets (Gross NPAs) of Rs 3712.07 Crore (.00 % of total assets) and Net Non Performing Assets (Net NPAs) of Rs 1525.66 Crore (.00% of total assets). For the quarter ended 30-06-2020, the company reported a Consolidated Interest Income of Rs 2827.74 Crore, down -1.40 % from last quarter Interest Income of Rs 2867.78 Crore and up 5.89 % from last year same quarter Interest Income of Rs 2670.52 Crore. The bank reported net profit after tax of Rs 411.58 Crore in latest quarter.

federal-graph

Investment Rationale
Favourable asset mix as reflected in moratorium at ~24% (12th July’20) and 11/12% adjusted for partial payments, strong liability franchise and boost to core fee income (though marginal) would ensure Federal Bank navigating the current cycle effectively than peers. In current circumstances, 0.7x FY22E BV seems factoring in lot of pessimism rending risk-reward favourable. The brokerage maintains BUY with an unchanged TP of Rs 70.

Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of June 30, 2020, while FIIs held 31.5 per cent, DIIs 11 per cent and public & others 31.9 per cent.

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