Dolat Capital Market has given Buy recommendation for ICICI Bank with a target price of Rs. 640 in its research report issued on Jan 30, 2021

Dolat Capital Market’s research report on ICICI Bank

ICICI bank reported a robust operating performance with NII and PPoP growth of 16% and 17% respectively. PAT grew by 19% YoY with a RoA of 1.7% (annualized) for the quarter. Pro forma gross NPAs were contained at 5.42% as of Dec-20 against 5.36% in the last quarter, with pro-forma PCR at 77%, higher than peers. Higher PCR was also driven by the Bank’s revised provisioning policy wherein it has raised provisioning requirement for early bucket NPAs. Pro forma slippages were contained at 4.5% for 3QFY21 and 2.7% for 9MFY21, with over ~75% of slippages from the retail book, well spread across secured and unsecured portfolios. Sequential loan growth at 7% was very encouraging, well spread across domestic corporate (7.5% QoQ), retail (8% QoQ), and SME (16% QoQ). Growth trends in both SME (25% YoY) and business banking (39% YoY) books remained very strong led by the bank’s low market share, empowerment of branches, and decongestion of SME underwriting.

Outlook

The bank is well poised to deliver a 1.5-1.6% RoA led by its improving operating metrics, increased confidence on asset quality along with high std provision buffers, and best in class liability profile. Tweaking our forward estimates marginally, we maintain our BUY recommendation on the stock with a SOTP-based TP of Rs640, valuing the standalone bank at 2.2x Dec-22E book, which including the value of subsidiaries implies 2.6x P/ABV.

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