This week we look at analyst picks from the banking and finance sector with net profit and revenue growth in Q1FY24. 

1. ICICI Bank: Edelweiss maintains its ‘Tactical Buy’ rating on this bank with a target price of Rs 1,195, indicating an upside of 20.3%. In Q1FY24, the bank’s net profit surged by 39.7% YoY to Rs 9,648.2 crore, while the revenue increased by 36.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 4.3%. Analyst Raj Jha is positive about the bank’s consistent return ratios and sound asset quality. 

Overall advances and deposits have grown by 18% YoY each. “Growth remains broad-based,” says Jha. Even though net interest margins (NIM) expanded by 77 bps YoY, the analyst expects pressure due to the increased cost of funds in the coming quarters. But he says that despite this pressure, ICICI Bank will sustain its strong performance on most parameters. He concludes that the bank’s focus on a digital push, risk-calibrated operating returns, and a strong balance sheet will result in growth.

2. CreditAccess Grameen: Motilal Oswal reiterates its ‘Buy’ call on this bank with a target price of Rs 1,660. This indicates an upside of 19%. In Q1FY24, the bank's profit grew 161.2% YoY to Rs 346.3 crore, while revenue increased by 88.4%. It beat Trendlyne Forecaster’s net profit estimates by 20.1%. Analysts Abhijit Tibrewal,  Nitin Aggarwal and Parth Desai note that “margin expansion and opex efficiencies led to a strong quarter.”

The analysts are optimistic about the bank’s focus on new customer acquisitions and the addition of 40 new branches. CreditAccess Grameen also plans to increase the proportion of its long-term borrowings. The analysts expect the firm to dominate on the back of lowest-cost organized financing,  improved operational efficiency through technology, and integrated risk management in every process, leading to superior asset quality and lower credit costs. “With a strong capital position, the bank can navigate any potential future disruptions, and capitalise on the growth opportunity over the medium term,” they say.

3. Karur Vysya Bank: ICICI Securities maintains a 'Buy' rating on this bank with a target price of Rs 165, indicating a potential upside of 27.6%. In Q1FY24, the bank reported net profit growth of 56.8% YoY to Rs 358.6 crore, while revenue increased by 27.8% YoY.  It beat Trendlyne Forecaster's net profit estimates by 4.8%. The analysts at ICICI Securities are optimistic about the bank's outlook due to its impressive loan book growth, leading to a healthy quarter.

One key reason for the analysts' optimism is the bank's lowest cost of deposits compared to its peers. The analysts project that the bank will achieve superior return ratios, possibly outperforming its competitors. The bank's presence in tier-1 cities, with 16% of its capital employed there, strengthens its position. Another factor adding to their bullish view is the bank's decision to aggressively hire new employees. This move is expected to enhance its franchise strength, which adds to its growth prospects.

4. IndusInd Bank: BoB Capital Markets maintains its ‘Buy’ rating on this bank and raises the target price to Rs 1,755 from Rs 1,550. This implies an upside of 24.1%. In Q1FY24, the bank’s standalone net profit rose by 32.5% YoY to Rs 2,123.6 crore and revenue increased by 31.1% YoY. It beat Trendlyne Forecaster’s net profit estimates by 0.2%.  

Analyst Ajit Agrawal says the healthy growth in net profit is from rising net interest income and lower provisions. He expects loan growth to continue in FY24 on the back of traction in the vehicle finance and microfinance institution (MFI) segments. Agrawal adds, “Corporate loans did well, led by small businesses (+10% QoQ), and the bank aims to double this book to 20% of the corporate mix in 2-3 years.”

Overall, Agrawal believes that the bank’s strong growth momentum in vehicle finance and MFI loans, along with improving asset quality and a healthy loan mix, bodes well for its future growth. He anticipates the firm’s net profit to grow at a CAGR of 22.4% over FY23-25.  

5. Can Fin Homes: Axis Direct keeps its ‘Buy’ rating on this housing finance company and raises the target price to Rs 930 from Rs 675, implying an upside of 16.5%. In Q1FY24, the company’s standalone net profit rose 13.1% YoY to Rs 183.5 crore and revenue increased by 34.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 14.3%.

Analysts Dnyanada Vaidya, Prathamesh Sawant and Bhavya Shah are positive about the housing finance company’s medium-term growth prospects on the back of improving demand trends, helped by a pause in rate hikes and easing supply-side constraints. They also like that the company keeps its assets under management (AUM) growth guidance at 18-20% over the medium term. 

The analysts add, “Despite the sharp run-up in the stock (+ 45% in 3 months), it trades at valuations lower than its peers.” They believe the company shows robust growth while maintaining stable asset quality and improving profitability. The analysts expect the firm’s net profit to grow at a CAGR of 19% over FY23-25. 

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)