Midcap Banking Stock To Buy That Can Give Up To 23% Return, Jumps 8.86% In 1 Week: Motilal Oswal

Motilal Oswal recommends "Buy" IDFC First Bank (IDFCFB), a midcap private sector, with a target price of Rs 75 apiece. According to the given target price, the stock is likely to give up to 23% return.

IDFC First Bank is engaged in the business of Banking Services. The Bank was founded by the merger of Erstwhile IDFC Bank and Erstwhile Capital First on December 18, 2018. It has a market valuation of Rs 40,668.36 crore.

Valuation and view

According to Motilal Oswal, IDFCFB delivered a strong quarter with healthy growth across key parameters. Strong treasury gains boosted earnings, which were prudently utilized to increase coverage. Margin too saw further expansion.

"Business growth was healthy and we estimate a 25% CAGR in loans during FY23-25. The bank expects new businesses such as Commercial Banking, Credit Cards and Home Loans to drive loan growth and earnings. IDFCB has scaled up retail deposits (76% of loans), with a strong CASA ratio of ~50%. It has invested well in digital capabilities, branch and product expansion and has presence across retail products. Cost ratios are elevated but will moderate as scale benefits come into effect, while the retirement of legacy high-cost borrowings will aid NII growth," the brokerage has said.

It added, "We estimate a 31% CAGR in PPoP during FY23-25, while controlled credit costs will drive a 31% CAGR in PAT over the similar period. We thus estimate RoA/RoE to reach 1.3%/13.5% by FY25. Maintain BUY with a TP of INR75 (1.6x Sep'24E BV)."

Stock Outlook

The last traded share price of IDFCFB is Rs 61.45 apiece, up 3.36% from its previous close of Rs 59.45 apiece. It traded the 52 week high on 15 December 2022 at Rs. 64.30 apiece and 52 week low on 22 June 2022 at Rs. 28.95 apiece, respectively.

Returns In the Past 5 Years

The stock has performed well over the past 5 years giving positive returns. It gained 8.86% in 1 week. It has given 16.49% positive return in 1 month and 10.32% in the past 3 months, respectively. It has given 9.54% positive return in 6 months. It gave 54.79% positive return in 1 year. In 3 years it has given 176.18% positive return. In the past 5 years it has given 28.15% positive return.

Disclaimer - The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.