This week, we take a look at five stocks that analysts have picked from the banking and finance sector.
1. IndusInd Bank:
BoB Capital Markets maintains its ‘Buy’ rating on this private bank with a target price of Rs 1,755. This implies an upside of 21.6%. In Q2FY24, the bank’s net profit grew 22.8% YoY to Rs 2,181.5 crore, and its revenue rose by 29.2% YoY.
Analyst Ajit Agrawal attributes the bank’s growth to its robust credit growth trajectory, where vehicle finance, non-vehicle finance and microfinance (MFI) segments have outperformed. He notes that the company’s net interest margin (NIM) was stable due to the recovery of its high-yielding consumer finance division (CFD).
Agrawal adds, “Strong growth momentum in retail and recovery in the MFI book led to stable margins, despite higher costs.” The analyst remains optimistic about the bank’s prospects due to its favourable loan mix and stable asset quality. He expects the company’s net profit to grow at a CAGR of 21.3% over FY23-25.
2. ICICI Bank:
Edelweiss keeps its ‘Buy’ rating on this bank with a target price of Rs 1,195, implying an upside of 30.1%. In Q2FY24, its net profit grew by 35.8% YoY to Rs 10,261 crore, and its net interest income (NII) rose by 23.8% YoY. It beat Trendlyne Forecaster’s net profit estimates by 6.6%.
Analysts Raj Jha and Umang Patil attribute the bank’s growth in Q2 to a healthy rise in domestic loans. In terms of business segments, retail and business banking drove growth. The analysts also highlight improving asset quality, with declining slippages in the retail, rural and business banking segments.
Jha and Patil believe the firm will continue to see healthy growth on the back of asset quality improvement and growing loans. They add, “A strong digital push, focus on risk-calibrated operating returns, and a strong balance sheet will result in a re-rating of the stock.” They expect the private bank’s net profit to grow at a CAGR of 17.9% over FY23-25.
3. Can Fin Homes:
HDFC Securities reiterates its ‘Buy’ call on this housing finance company with a target price of Rs 920. This indicates an upside of 26.6%. In Q2FY24, the company’s profit increased by 11.6% YoY to Rs 158.1 crore, while its revenue grew by 32.5% YoY to Rs 871 crore. It beat Trendlyne Forecaster’s profit estimate by 2.3%. Analysts Krishnan ASV, Deepak Shinde and Neelam Bhatia say, "Delayed asset repricing and a mild softening in the funding environment have contributed to an improvement in NIMs, which now stand at 3.8%."
According to the analysts, asset quality remains stable, with slippages from the restructured portfolio at 14%, which is marginally higher than the guided range. The management has reiterated its loan growth guidance of 18%, coupled with an acceleration in return disbursement. On account of a one-time provision, the analysts have slightly reduced their FY24 earnings estimates for the company by 4%.
4. ICICI Prudential Life Insurance:
KRChoksey reiterates its ‘Buy’ call on this life insurance company with a target price of Rs 625, indicating an upside of 20.2%. In Q2FY24, the company’s profit grew 21.9% YoY to Rs 243.9 crore, despite its revenue falling 22.3% YoY. It missed Trendlyne Forecaster’s profit estimate by 0.4% but beat the revenue estimate by 2.8%.
Analyst Unnati Jadhav believes that the company’s VNB margin declined by 308 bps YoY primarily because of the shift in the underlying product mix towards unit-linked insurance and a decline in non-participating business.
The analyst remains optimistic about the insurance services provider as it has focused on expanding its non-ICICI Bank channels and expects it to reap results from H2FY24 onwards. Jadhav believes that a balanced product mix and improved productivity of the agency channel will drive premium growth in the coming quarters. She says, “We will closely monitor the trends in product mix and their impact on margins going ahead.”
5. IIFL Finance:
ICICI Securities maintains a ‘Buy’ call on this financial services provider with a target price of Rs 760. This indicates an upside of 22.7%. The company’s net profit grew by 25% YoY to Rs 474.3 crore in Q2FY24, while its revenue grew by 23.5% YoY. According to Trendlyne Forecaster, it missed the profit estimate by 2.1% YoY. Analyst Renish Bhuva says, “IIFL Finance’s healthy Q2FY24 financial performance reflects the successful execution of its retail-focused strategy.”
Bhuva notes that controlled asset quality, sustained traction in assigned and co-lending volumes, and strong growth in higher-yielding products like MFI and digital loans led to growth in net profit. He remains optimistic about IIFL, as it has increased its physical presence by adding 184 branches in Q2FY23, taking its total branches to 4,596 in H1FY24. He believes that diversified AUM, investment in franchise development, and access to funds at competitive rates will help sustain its growth momentum.
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
(You can find all analyst picks here)
