IDFC First Bank shares yield more than 101% in 4 months; Should you buy after Q2 results?

Mumbai-based IDFC First Bank is expected to post a double-digit share price increase going forward after a series of strong numbers in the quarter ended September 30, 2022 (Q2FY23). The overall quarter was in line with expectations. On Monday, due to Q2 results, IDFC First stock saw strong buying sentiment and even hit a new 52-week high. Due to the latest stock performance, IDFC First emerged as a multi-bagger stock with a gain of more than 100% over a period of a little over 4 months.

During Monday’s muhurat trading hours, IDFC First stock hit a new 52-week high of 59.40 each on BSE. Stock ends at 58.35 each increased 1.83%.

From the beginning of the year until now, First IDFC Shares jumped more than 17.5% on Dalal Street. From a 52-week low of 28.95 each recorded on June 22 of this year, IDFC First stock emerged as a multi-pocket company as it rose more than 101.5% in a little over 4%.

There is a lot of upside potential in IDFC First Bank share.

IDFC First Bank’s Q2/23 numbers were impressive with 266% profit growth. 556 crore to profit of 152 crore in the same period last year. NPAT was driven by strong growth in core operating income. Furthermore, net interest income (NII) increased by 32% to 3,002 crore in Q2FY23 words 2,272 crore in Q2 FY22. Net profit margin increased to 5.98% in the quarter following review from 5.83% in Q2FY22 and 5.89% in Q1FY23.

In a report, Sagar Shah Senior Research Analyst at Phillip Capital said, “The Company’s Q2 2015 met expectations due to 25% financed asset growth and improved asset quality. with GNPA at 3.18% and NNPA at 1.09%”, adding, “Net profit margin steady at 5.98% (Yearly) thanks to solid traction in deposits of clients, higher advance yields and healthy growth in financed assets.”

Furthermore, Shah’s note adds, “The bank further increased its PCR at the bank level by 76.49% thereby further strengthening its Balance Sheet. 5992 Have 4% of total funding. The company’s books have a steady 20% growth, giving the book a good balance. “

As of September 30, 2022, the bank’s gross NPA improved to 4.27% from 3.36% in Q1FY23 and 3.18% in Q2FY22. Net NPAT came in at 2.09% in Q2FY23 compared to 1.30% in Q1FY23 and 1.09% in Q2FY22. While the bank’s funded assets have increased by 25% year-on-year to 1,45,362 crore in the latest quarter.

In addition, the bank managed to achieve 10% ROE and 1.07% ROA in Q2FY23 itself which it was oriented to achieve in Q4FY23.

IDFC First management is expected to maintain a sustained net margin of around 6% going forward thanks to solid traction in financed retail properties. Furthermore, the bank is expected to completely reduce its infrastructure loan book to zero in the next few years, i.e. 4% of total assets financed by September 30, 2022. In addition, the lender Borrowers expect ROE and ROA to improve from here due to improvements in operating leverage, the stockbroker’s note emphasized.

Regarding the immediate outlook, Shah’s note said, “Given the upward trends in industry incentives, we believe the banking sector is poised to outperform in the coming years on the back of healthy credit growth. and improving macro indicators although any macro uncertainty will be a key factor to watch out for. . We believe IDFC First Bank will perform well among Tier 2 banks thanks to its ability strong deposit attraction, healthy disbursements and good asset quality management.”

Shah’s announcement said, “We adjusted PPOP and NPAT up from FY22 – FY24E to generate higher returns on advances and higher cost of capital. I expect the bank’s and PPOP’s total income to grow at a CAGR of 23% and 41% respectively compared to FY 22 – YEAR 24E AT CMP, the bank is trading at 1.4x Adjusting BV FY24E is mostly positive but we believe improving profitability will drive the stock higher.We recommend a ‘BUY’ rating on the stock with a price target of 66, implying a 15% increase from current levels. “

Disclaimer: The views and recommendations given above are those of individual analysts or brokerage firms, not Mint.

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