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30 Mar 2019

SHARE MARKET--A PROMISING BANK FOR LONG TERM--Buy IDFC First Bank; target of Rs 57: Prabhudas Lilladher

Prabhudas Lilladher is bullish on IDFC First Bank has recommended buy rating on the stock with a target price of Rs 57 in its research report dated February 06, 2019.
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Prabhudas Lilladher's research report on IDFC First Bank

IDFCFB's financial performance post-merger saw hit on earnings on back of creation of goodwill from merger, adjusting to the one-time exceptional item PAT was Rs1.53bn. Operationally, margins saw improvement benefitting from erstwhile CAFL's high yielding book but cost of funding was slightly up on back of shoring of deposits. Combined loan assets stood at Rs1046.6bn with retail assets share at 35% and non-retail assets at 54% with growth in focus segments of retail & corporate and drawing down infra loan assets. Bank's loan book with retail loans mix will likely increase to ~50% in next 3 years and 70% in 5-6 years and only selective bets in corporate loans. Bank will see strong shore up in deposits from increased network presence and existing retail franchise with high focus on retail deposits which will also bring down C-D ratio to sustainable levels and lower high cost borrowing.


We expect ROEs to move up from current 3-4% to 10% in medium term on back of improving NIMs+Fees, higher operating leverage from presence buildup and lower asset quality issues. We recommend BUY with TP of Rs57 based on 1.5x Sep-20 ABV.

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