At 52-week high, this Jhunjhunwala stock can rise further to Rs 165; key details
Karur Vysya Bank shares: The brokerage has retained its buy call on the multibagger stock and revised the target to Rs 165 against the earlier Rs 155.
- Jun 19, 2023,
- Updated Jun 19, 2023 8:17 AM IST
Shares of multibagger Karur Vysya Bank Ltd are among the top picks of Emkay Global in the small cap banking space. The brokerage has retained its buy call on the stock and revised the target to Rs 165 against the earlier Rs 155. That’s an upside of 29.46% against the previous close of Rs 127.75 and a 45% rally from the market price of Rs 113.9 on June 13, 2023. The recommendation was made on June 13.
Late investor Rakesh Jhunjhunwala was mentioned as one of the shareholder with 1.85 per cent stake or 1.48 crore shares at the end of March 2023 quarter. His wife Rekha Jhunjhunwala owned 2.89% stake or 2.31 crore shares in the last quarter, show shareholding data.
In the previous session, the banking stock hit a 52-week high of Rs 129.85, rising 9.03% on BSE.
It opened higher at Rs 119.30 against the previous close of Rs 119.10. Later, the Karur Vysya Bank stock closed 7.01% higher at Rs 127.45. The share has gained 183 per cent in a year and risen 13 per cent since the beginning of this year. The stock has risen 394% in three years.
The multibagger stock has climbed 30.7 per cent in a month and gained 16.4% per cent in one week. Total 14.02 lakh shares of the firm changed hands amounting to a turnover of Rs 17.29 crore on BSE. Market cap of the bank rose to Rs 10,197 crore. The stock hit a 52-week low of Rs 43.05 on June 20, 2022.
In terms of technicals, the relative strength index (RSI) of the stock stands at 86.9, signaling it's trading in the overbought zone. The banking shares have a beta of 1.1, indicating high volatility in a year. Karur Vysya Bank shares stand higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
The private sector lender reported a rise of 58.3 per cent in net profit to Rs 338 crore for the quarter ended March 2023 against a net profit of Rs 214 crore reported in the corresponding quarter last fiscal.
Net interest income (NII) climbed 25.7 per cent to Rs 892.6 crore from Rs 710 crore year-on-year (YoY). Total income during Q4 rose to Rs 2,169 crore from Rs 1,615 crore in Q4 FY22.
The board of directors recommended a dividend of Rs 2 per equity share of face value Rs 2 for the financial year ended 31 March 2023, subject to the approval of the shareholders.
Here’s a look at four triggers listed by Emkay Global that can take the stock to Rs 165 mark.
Growth strategy to be guided by favorable risk-reward ratio
Karur Vysya Bank is finally on a growth track, after a nearly sub-10% credit growth over FY15-22 due to the bank’s corporate de-bulking strategy, followed by MD’s resignation and Covid-induced disruption. With asset-quality issues now largely behind, the bank has clocked 16% YoY net credit growth; for FY24, it guides for a slightly lower number, as it believes in gradually pacing up growth amid macro dislocations, to avoid any accidents. Within retail, bank would retain focus on growing its mortgages/LAP portfolio, while also ramping-up its retail gold portfolio. The bank pulled the plugged on the personal loan front in FY23, but plans to focus on building a healthy MFI portfolio over time. MFI growth will be initially led by the BC model, while bank is building its team/processes; it will accelerate growth once it gains confidence on the risk-reward front.
Healthy margins, contained cost ratios to help sustain core profitability
The bank has reasonable CASA ratio at 33%, which it nevertheless plans to gradually improve to 40% in the long run, equipped with a mix of physical plus digital strategy and thus help sustain its healthy NIMs (>3.8-4%).After a long haul, the bank has decided to open 35 branches in FY24, and plans to thereafter build a formidable CASA base. The bank believes that a cluster-based approach would help it not only to ramp up its MSME asset book, but its CASA base as well. Cost-income ratio has come down, below its traditional range of 53-60%, which the bank aims to sustain at 45-50%, thus supporting Karur Vysya Bank’s core return on assets at 2.4-2.6% over FY24-26E
Lower slippages, healthy PCR to limit incremental LLP
The bank has guided for contained slippages at 1% for FY24 which coupled with better recovery/w-offs, should lead to steady reduction in gross non-performing assets to below 2%. The SMA2 book stands at only 0.2%,while the RSA book too has declined, to 1.5%of loans, with limited risk of relapse. The bank carries healthy PCR at 68% (technical PCR at 92%), while it has guided for LLP at 75bps in FY24 vs 150bps in FY23. We have conservatively built-up a slightly higher PCR (70%) and hence LLP of 1%, factoring-in the incremental macro dislocation and Bank’s strategy to build some contingent buffer.
Attractive valuations, despite the run-up, make KVB a compelling BUY
With asset-quality stress and concerns around management stability/credibility now largely behind, Karur Vysya Bank is on course to reclaim the best RoA/RoE among peers, at 1.5%/15-16% over FY24-26E, on a sustainable basis, led by better quality growth, NIMs/fees and contained LLP. This coupled with the healthy capital ratio (CET1:16.8%) and attractive valuation (0.8xFY25E ABV), makes Karur Vysya Bank one of the preferred picks among small-cap banks. We retain BUY, with revised TP of Rs 165/share (vs Rs 155earlier), valuing the bank at 1.2x FY25EABV
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Shares of multibagger Karur Vysya Bank Ltd are among the top picks of Emkay Global in the small cap banking space. The brokerage has retained its buy call on the stock and revised the target to Rs 165 against the earlier Rs 155. That’s an upside of 29.46% against the previous close of Rs 127.75 and a 45% rally from the market price of Rs 113.9 on June 13, 2023. The recommendation was made on June 13.
Late investor Rakesh Jhunjhunwala was mentioned as one of the shareholder with 1.85 per cent stake or 1.48 crore shares at the end of March 2023 quarter. His wife Rekha Jhunjhunwala owned 2.89% stake or 2.31 crore shares in the last quarter, show shareholding data.
In the previous session, the banking stock hit a 52-week high of Rs 129.85, rising 9.03% on BSE.
It opened higher at Rs 119.30 against the previous close of Rs 119.10. Later, the Karur Vysya Bank stock closed 7.01% higher at Rs 127.45. The share has gained 183 per cent in a year and risen 13 per cent since the beginning of this year. The stock has risen 394% in three years.
The multibagger stock has climbed 30.7 per cent in a month and gained 16.4% per cent in one week. Total 14.02 lakh shares of the firm changed hands amounting to a turnover of Rs 17.29 crore on BSE. Market cap of the bank rose to Rs 10,197 crore. The stock hit a 52-week low of Rs 43.05 on June 20, 2022.
In terms of technicals, the relative strength index (RSI) of the stock stands at 86.9, signaling it's trading in the overbought zone. The banking shares have a beta of 1.1, indicating high volatility in a year. Karur Vysya Bank shares stand higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.
The private sector lender reported a rise of 58.3 per cent in net profit to Rs 338 crore for the quarter ended March 2023 against a net profit of Rs 214 crore reported in the corresponding quarter last fiscal.
Net interest income (NII) climbed 25.7 per cent to Rs 892.6 crore from Rs 710 crore year-on-year (YoY). Total income during Q4 rose to Rs 2,169 crore from Rs 1,615 crore in Q4 FY22.
The board of directors recommended a dividend of Rs 2 per equity share of face value Rs 2 for the financial year ended 31 March 2023, subject to the approval of the shareholders.
Here’s a look at four triggers listed by Emkay Global that can take the stock to Rs 165 mark.
Growth strategy to be guided by favorable risk-reward ratio
Karur Vysya Bank is finally on a growth track, after a nearly sub-10% credit growth over FY15-22 due to the bank’s corporate de-bulking strategy, followed by MD’s resignation and Covid-induced disruption. With asset-quality issues now largely behind, the bank has clocked 16% YoY net credit growth; for FY24, it guides for a slightly lower number, as it believes in gradually pacing up growth amid macro dislocations, to avoid any accidents. Within retail, bank would retain focus on growing its mortgages/LAP portfolio, while also ramping-up its retail gold portfolio. The bank pulled the plugged on the personal loan front in FY23, but plans to focus on building a healthy MFI portfolio over time. MFI growth will be initially led by the BC model, while bank is building its team/processes; it will accelerate growth once it gains confidence on the risk-reward front.
Healthy margins, contained cost ratios to help sustain core profitability
The bank has reasonable CASA ratio at 33%, which it nevertheless plans to gradually improve to 40% in the long run, equipped with a mix of physical plus digital strategy and thus help sustain its healthy NIMs (>3.8-4%).After a long haul, the bank has decided to open 35 branches in FY24, and plans to thereafter build a formidable CASA base. The bank believes that a cluster-based approach would help it not only to ramp up its MSME asset book, but its CASA base as well. Cost-income ratio has come down, below its traditional range of 53-60%, which the bank aims to sustain at 45-50%, thus supporting Karur Vysya Bank’s core return on assets at 2.4-2.6% over FY24-26E
Lower slippages, healthy PCR to limit incremental LLP
The bank has guided for contained slippages at 1% for FY24 which coupled with better recovery/w-offs, should lead to steady reduction in gross non-performing assets to below 2%. The SMA2 book stands at only 0.2%,while the RSA book too has declined, to 1.5%of loans, with limited risk of relapse. The bank carries healthy PCR at 68% (technical PCR at 92%), while it has guided for LLP at 75bps in FY24 vs 150bps in FY23. We have conservatively built-up a slightly higher PCR (70%) and hence LLP of 1%, factoring-in the incremental macro dislocation and Bank’s strategy to build some contingent buffer.
Attractive valuations, despite the run-up, make KVB a compelling BUY
With asset-quality stress and concerns around management stability/credibility now largely behind, Karur Vysya Bank is on course to reclaim the best RoA/RoE among peers, at 1.5%/15-16% over FY24-26E, on a sustainable basis, led by better quality growth, NIMs/fees and contained LLP. This coupled with the healthy capital ratio (CET1:16.8%) and attractive valuation (0.8xFY25E ABV), makes Karur Vysya Bank one of the preferred picks among small-cap banks. We retain BUY, with revised TP of Rs 165/share (vs Rs 155earlier), valuing the bank at 1.2x FY25EABV
Also read: HUL, Automobile Corporation of Goa, Craftsman Automation shares to turn ex-dividend today
Also read: Indian Energy Exchange, ZEE Entertainment, Indiabulls Housing among 8 shares in F&O ban list today