IDFC First Bank shares jump 6% on doubling of Q4 profit. Here's are new stock price target

Shares of  IDFC First Bank climbed 6 per cent in Tuesday's trade following a strong set of quarterly results. Analysts said the stock valuations at 1.3 times FY25E adjusted book value appear attractive in the context of strong growth, improving return on asset (RoAs), comfortable asset quality and management longevity. For now, analysts largely have 'Neutral' or 'Hold' rating on the stock unseasoned retail loan portfolio and a weak deposit franchise vis-a-vis peers.  

On Tuesday, the stock rose 5.89 per cent to hit a high of Rs 65.20 on BSE.

Motilal Oswal Secuities said IDFC First Bank is entering a phase of strong loan growth as the drag from the wholesale book continues to moderate. This, it said, will be aided by a strong pickup in profitability due to the replacement of high-cost borrowings, better cost trends and controlled credit costs. This brokerage has a target of Rs 75 on the stock.

Maintain BUY.

ICICI Securities has upped its target to Rs 70 on the stock from Rs 59 earlier. The key risk, it said, is in inability to manage growth and asset quality in an arguably riskier asset segment.

The bank said its March quarter net profit grew 134 per cent YoY to Rs 803 crore from  Rs 343 crore in the year-ago quarter. The strong growth in core operating income was the major driving force behind this increase.

"IDFC First posted a strong Q4FY23 beating PPOP and PAT forecasts. PAT jumped 33 per cent QoQ/134 per cent YoY to Rs 803 crore. Calculated NIM rose 17 bps QoQ despite a low EBLR book and a sharp hike in deposit rates, due to a 50 bps QoQ uptick in the yield on loans and repricing of legacy borrowings," said Nuvama Institutional Equities.

The brokerage said it is revising FY24/25E earnings by 8.19 per cent/down 4.61 per cent, and hence the target price to Rs 60 from Rs 57 at unchanged 1.3 times BV FY25E). "All in all, we retain ‘HOLD’ despite a strong FY23 given an unseasoned retail loan portfolio and a weak deposit franchise vis-a-vis peers. We also expect CI to remain sticky given huge investments by competition," it said.