What should investors do with Federal Bank post Q4; buy, sell or hold?

Global brokerage firms maintained their positive rating on Federal Bank after the bank reported over two-fold jump in net profit for the March quarter. The profit was at Rs 381.51 crore on account of lower provisioning and higher interest income.

Total income of the bank rose to Rs 3,444 crore in the March quarter of 2018-19, from Rs 2,862 crore in the same period last fiscal, Federal Bank said in a BSE filing.

Provisioning for bad loans during the quarter more than halved to Rs 177.76 crore, as against Rs 371.53 crore in the corresponding period of 2017-18.

Reacting to the results, the stock rose over 2 percent intraday on May 6 even though the S&P BSE Sensex was down nearly 1 percent in morning trade.

Here’s what global brokerage firms recommend post March quarter results:

Jefferies: Buy| Target raised to Rs 114 from Rs 104

Jefferies maintained its buy rating on Federal Bank and raised its 12-month target price to Rs 114 from Rs 104 earlier.

The asset quality surprised positively, and margin should remain at ~3.2 percent. The global investment bank increased its EPS estimate by 2.5-3 percent.

Jefferies is factoring slightly lower net interest margins (NIMs), aligning it to management’s guidance. It is also building in lower slippage ratio and higher recoveries. Jefferies forecast 27 percent EPS CAGR and 10.1 percent BV CAGR over FY19-22.

Citigroup: Neutral| Target raised to Rs 110 from Rs 90 earlier

Citigroup maintained its neutral rating on Federal Bank and raised its target price to Rs 110 from Rs 90 earlier.

The bank has displayed healthy loan growth, and at the same time margins outlook is also stable. RoA expansion will need sustained low credit cost and better fees/opex.

Negative net slippages led to 3 percent QoQ decline in gross NPA. However, meaningful stock re-rating is unlikely as RoA is seen above 1.1-1.2 percent.

Morgan Stanley: Equal Weight| Target Rs 95

Morgan Stanley maintained its Equal Weight rating on Federal Bank with a target price of Rs 95.

The key positive for the Federal Bank was good asset quality while one negative factor was margin progression, which declined 5bps QoQ adjusted for write-offs.

DisclaimerThe above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.


Author: Ayaan