This Rakesh Jhunjhunwala-backed multibagger stock that is below ₹100 is seen as a good bet after a strong second quarter | Digireview

Scheduled commercial bank, Karur Vysya Bank, is currently a small cap stock trading below ₹100. The stock is just a few rupees from hitting its 52-week high. On Tuesday, Karur Vysya witnessed buying sentiment despite broader markets being bearish. This is due to the bank’s strong set of numbers in the second quarter of FY22. The stock has nearly doubled this year and even emerged as a multi-bagger. Based on the impressive Q2 figures, experts have recommended a buy for the stock with a price target of 115 to 125 pounds. The late Rakesh Jhunjhunwala is one of the major investors in this stock.

On BSE, shares of Karur Vysya Bank closed at ₹92.40, up 0.82%. The stock had hit an intraday high of ₹93.65 each. The stock is a few rupees away from a 52-week high of ₹96.20 each. The current market cap is approximately ₹7,393.27 crore.

This year, the stock has skyrocketed 100% in Dalal Street so far this year. The stock stood at the level of ₹46.2 at the beginning of January this year. However, in one year, the stock rose more than 82% from its ₹50.65 level on October 25, 2021.

Jhunjhunwalas are investors in Karur Vysya Bank since December 2015.

On June 30, 2022, the late Rakesh Jhunjhunwala owned 3,59,83,516 shares or 4.5% in Karur Vysya Bank. Rakesh passed away on August 12, 2022. However, his estate including stock and property is transferred to his family. Karur Vysya Bank is still in the Jhunjhunwala portfolio.

According to Trendlyne data, Jhunjhunwala’s stake in Karur Vysya Bank on October 25, 2022 is about ₹333 crore.

The Tamil Nadu-based bank posted a net profit of 250 crore in Q2FY23, up 52% ​​yoy, while net interest income was ₹821 crore, up 21% yoy. The net interest margin improved to 4.07% during the second quarter of FY23.

During the quarter, the bank’s loan portfolio grew 15% yoy with advances reaching 61,846 crore. It said credit decline continues to improve both yoy and qoq, fueling the growth of the advance portfolio. The lender’s jewelry loan portfolio is up 15% yoy to ₹15,465 crore.

Meanwhile, the bank’s deposits were 73,614 crore, up 13% yoy in Q23. CASA deposits were up 11.89% to 25,913 crore.

Asset quality improved with gross NPA of 3.97% in Q2FY23 versus 7.38% in Q2FY22 and 5.96% in Q1FY23.

Should You Buy Karur Vysya Bank After Second Quarter Printing?

Analysts from Emkay Global said in their report: “Bank’s business transformation, which began during the tenure of the former MD, has been further accelerated by current management engaged in lateral hiring of large private banks, in order to reduce liabilities/assets. Bank has also worked with Fintechs to close operational and outreach gaps in liabilities/assets.We believe this can keep opex high but would bring sustainability to the RoA, unlike in the past.”

Further, the analyst added: “If we factor in better-than-expected growth, margin trajectory and asset quality results, we increase our earnings for FY23-25E by 5-13% and expect RoA/RoE to be at an all-time high of 1.3%/15% in FY25E, only seen before 2013. So we upgrade our P/ABV to 1.0x from 0.8x, we keep buying on the stock with revised TP to Rs 125/share (vs Rs 95 ).”

Analysts Anand Rathi also said in a report: “KVB’s Q2 FY23 profitability improved, RoA reaching 1.16% (up 30 basis points year-over-year) on the back of good operating performance. Key positives for the quarter were 1) moderating slippage, 2) rebounding credit growth (high in many years), 3) better margins, and 4) strong liquidity and capitalization As credit growth is expected to be in the mid-teens and credit costs to moderate, profits are expected to We are maintaining our Buy rating, with a TP of Rs115, and value the stock at 0.9x P/ABV in the FY25e book.”

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