Arihant Capital has given Buy recommendation for CSB Bank with a target price of Rs. 371 in its research report issued on Oct 26, 2021
Arihant Capital’s research report on CSB Bank
CSB Bank has posted 1.7x YoY jump in its net profit at INR 119 cr as against our expectation of INR 69 cr, primarily driven by decline in provision. Provision for the quarter stood at INR -9 cr vs. INR 93 cr in the previous quarter. Headline NPA ratio of the bank improved with GNPA reduction of 77bps QoQ at 4.1% (Ex-gold loan GNPA stood at 2.1%) at and NNPA decreased by 58bps at 2.6% (Ex-gold loan NNPA stood at 1.1%) on a sequential basis. Recoveries during the quarter remained strong at INR 190 cr leading to improvement in asset quality. Business growth momentum of the bank slowed down compared to previous quarter mainly due to moderation in retail portfolio. Restructured book of the bank increased from 50bps to 80bps on a sequential basis.
Advances growth of the bank to pick up with pick up in gold loan. We roll forward our estimates to FY24E and value the stock at 2x FY24E P/ABV to arrive at the target price of INR 371 and revise our rating on the stock to Buy from Accumulate. We believe, bank is well positioned to deliver RoA/RoE of 1.4%/16% by FY24E.