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Epic Research
Federal Bank (Buy)
CMP: ₹107.35
Target: ₹123
Key highlights: Results Q4: a) Highest ever annual net profit of ₹1,243.89 crore (grew by 41.54 per cent) and quarterly net profit of ₹381.51 crore (grew by 163.13 per cent).
b) Annual operating profit at ₹2,763.10 crore (grew by 20.61 per cent); Quarterly operating profit at ₹754.75 crore (grew by 28.23 per cent).
c) Total business of the bank registered a growth of 20.28 per cent to reach ₹2,46,783.61 crore.
Q1 FY20: a Net profit grew by 163 per cent on y-o-y basis to ₹381 crore against ₹145 crore. Operating Profit stood at ₹754 crore as against ₹588 crore (y-o-y basis) up 28 per cent.
b) Net Interest Income came at ₹1,096 crore vs ₹933 crore up 17.5 (y-o-y basis).
c) GNPA (per cent) came down to 2.92 per cent and NNPA stood at 1.48 per cent down by 8 and 21 bps respectively.
Valuation: Federal Bank has witnessed normalisation in slippages, steady NIM margins and improvement in asset quality. These multiple factors will increase the earnings potential for the bank and bring in desired sustainability. We recommend buying stock at current levels for price target of ₹123 per share valuing stock at 11x of FY21 earnings and 1.6x of FY21 tangible BV.
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