Karur Vysya Bank share price: Buy Karur Vysya Bank, price target Rs 72 : Emkay Global Financial Services

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Emkay Global Financial Services has a call to buy with a target price of Rs 72. The current market price of Karur Vysya Bank is Rs 46.5. The period given by the analyst is the year when the price of Karur Vysya Bank can achieve the set target.

Karur Vysya Bank, incorporated in 1916, is a banking company (having a market capitalization of Rs 3712.05 crore).

Karur Vysya Bank’s main income products/segments include interest and discounts on advances and bills, income from investments, interest on balances with RBI and other interbank funds and interest for the year se ending March 31, 2021.



finance

For the quarter ended 31-03-2022, the company reported total standalone revenue of Rs 1614.75 crore, up 0.91% from last quarter. Total revenue of Rs 1600.12 crore and up 3.13% from the same quarter last year. Total revenue of Rs 1565.78 crore. The bank reported a net profit after tax of Rs 213.47 crore last quarter.

Investment rationale
Karur Vysya Bank announced a strong improvement in PAT in the fourth quarter, mainly due to lower LLPs and operating expenses. After the cleanup in FY 2018-20, the bank saw a steady improvement in its GNPA ratio to around 6% thanks to higher amortizations/recoveries. RoA also improved from a low of 0.3-0.5% to a high of 0.9% in FY22. Overall, credit growth has been relatively moderate to 10% year-on-year as part of the bank’s conscious strategy to shift away from consortium-based corporate lending, which was the main source of asset quality issues in the past. The bank forecast 12% growth for FY23 with an upward trend. As part of a differentiated strategy, it created a consumer banking department, led by a senior executive, to focus specifically on retail assets/liabilities.

The brokerage has revised its earnings estimates for fiscal year 23/24 by 8%/4%. He expects the bank to report a steady improvement in its RoA/RoE profile to 1-1.2%/11-13% with upside potential, subject to an improvement in its operating leverage by elsewhere below average. He keeps buying on the lender with a TP of Rs 72, valuing it at 0.7x Mar’24E ABV. The stock is trading at a cheap valuation of 0.4x FY24E ABV. After recovering from past asset quality and management volatility issues, and after seeing steady improvement in return ratios (RoAs >1% vs. FY24E) with best-in-class capital profile (Tier I > 17.5%), the stock offers attractive play in the small cap banking space. A higher dividend yield of 4-6% adds comfort.

Promoter/Fii Holdings
The promoters held 2.28% of the company’s capital as of March 31, 2022, while the FIIs held 15.35% and the DIIs 21.89%.

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