Following the beat, ICICI Securities upgraded the stock to ‘add’ rating from ‘hold’ with an increased price target of Rs 220, saying that the risk-reward is turning favourable.
“We believe Bandhan will likely see a sharp rise in RoA/RoE, from 1.3%/11% in FY24 to ~1.8%/1.9% RoA and ~15%/16% RoE for FY25E/26E. We recalibrate to a more constructive view on the stock given stabilising stress levels, likely substantial rise in RoA/RoE and inexpensive valuations of 1.5x trailing ABV and ~1.1x FY26E ABV,” ICICI Securities said.
During the quarter, Bandhan’s NIM was unchanged quarter-on-quarter (QoQ) at 7.6%. AUM and deposit growth was at 22-23% YoY while the asset quality showed an improvement, with the net NPL ratio unchanged QoQ at 1.2%, while the gross NPL ratio increased QoQ by 40 bps to 4.2%. Slippages were lower at 2.9%.
“The bank has delivered well above our expectations on asset quality. Management believes that the situation is not too worrisome and we are starting to hear neutral-to-positive comments about the MFI situation, though we acknowledge that this is still quite early and there is a possibility that these risks could resurface quite quickly, especially with lenders looking to slow down credit disbursement to comply with MFIN recommendations,” Kotak Institutional Equities said.The brokerage, which has a target price of Rs 250 on Bandhan Bank, was surprised at the capital adequacy ratio, which saw a decline of 300 bps this quarter.”At our Fair Value, we are valuing the bank at a relatively inexpensive valuation of 1.5X book and 9X June FY2026E EPS for RoEs likely moving back closer to ~15%. While the bank has shown a few unexpected outcomes in the past few quarters, we don’t see them as material in nature. The bank is well-positioned for a re-rating even when the macro situation for the industry is still developing,” it said.Motilal Oswal has raised earnings estimates for FY25/26 by 10%/11% and expect an FY26E RoA/RoE of 2.2%/18.9%.
Nuvama said it has retained the target price of Rs 200 with a hold rating.
