This Multibagger Bank Stock Hit Fresh 52-week High, Reported Robust Q2 Growth, Buy For 23% Gains

ICICI Bank (ICICI) reported a spectacular set of numbers with NIM for the quarter being the highest in at least a decade and RoA for the quarter being the second highest since at least 2007. YoY credit growth is also the highest in at least 12 years. Asset quality continued to improve too, with QoQ moderation in slippages reported by the bank.

In a recent report on ICICI Bank, Edelweiss Wealth Research has given a buy recommendation and set a target price of Rs 1,135 per share, sees a potential gain of up to 23%. It is a leading large cap private bank having a market cap of Rs 6,46,941 crore.

Stock Outlook & Returns

The stock's current market price (CMP) is Rs. 927.45 per share, opened at Rs 942.05 per share. The stock hit its fresh 52 week high today at Rs 943.25. Trading 1.7% below its 52-week high. Its 52-week low level is Rs 642.15 recorded on 07 March 2022.

The stock surged by 3.51% in the past 1 week. It has given a positive return of 5.23% in a month, and 15.92% in 3 months, respectively. The stock over a year has given 10.3% positive return. In the past 3 years, it has given 97.91% positive return. In the past 5 years, it has given a multibagger return of 203.7%.

Enhanced asset quality on the back of reduction in slippages

After a jump in Q1 as the restructured book emerged out of moratorium, slippages moderated a sharp 25% QoQ to INR 4,366cr or nearly 1.9% of the advances (vs. ~2.6% in Q1FY23). Retail, rural and business banking accounted for 84% of the slippages despite constituting 69% of the overall portfolio mix. Due to expectations of low slippages from the corporate book, management has guided that credit cost will remain below the normal levels for the next few quarters. The impact of slippages on asset quality was more than offset by recoveries and upgrades of INR3,761cr and write-offs/sales to the extent of INR1,197cr. This led to improvement of 22bps and 9bps QoQ in GNPA and NNPA to 3.19% and 0.61%, respectively. The bank's PCR strengthened sequentially to 80.6%. Of the total provisioning during the quarter (credit cost of ~0.7%), around 91% represented contingency provisions. The restructured book reduced to INR6,713cr or 0.7% of the advances (vs. 0.8% in the previous quarter), against which 31% has been provided for.

Loan growth momentum remains strong

ICICI Bank's advances grew a robust 23% YoY and 5% QoQ despite some rundown in the overseas book. Growth during the quarter was broad-based, with each of the bank's segments contributing meaningfully. Retail, rural and business banking grew 23% YoY and 6% QoQ, driven mainly by mortgages. Within retail, personal loans and credit card outstanding continue to scale well, although they still constitute a small proportion of the overall book. SME loans grew 27% YoY and 6% QoQ, whereas the corporate segment gained 23% YoY and 7% QoQ. The loan book split across the three segments is unchanged vis-à-vis a year ago.

 

Outlook and valuation

According to the brokerage at CMP, ICICI's stocks are trading at 2.3x FY24E ABV. The bank's sustained growth outperformance, strong digital push, focus on risk-calibrated operating returns and strong balance sheet will result in the bank's stocks continuing to see a re-rating. "We maintain our BUY recommendation with a revised target price of INR1,135/share, implying a 25% upside," the brokerage said.

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Wealth Research. 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 check with certified experts before making any investment decision.