On 24th April, the Bombay Stock Exchange (BSE) saw ICICI Bank’s share price rise 1% to an intraday high of Rs 761.5 after the private lender announced a 59 percent year-on-year increase in net profit to Rs 7,019 crore for the quarter ending March.
ICICI Bank’s stock has increased by 28 percent in the last year. Brokerages are still bullish on the company, predicting a 43 percent gain in the future due to a good asset quality outlook.
Moreover, in its Wealth Research report, brokerage firm Edelweiss Securities stated, “We expect return ratios to stay good given the bank’s digital push, which will keep opex in control; high PCR, which will provide comfort on the credit cost front; and sustained mid-to-high teens credit growth.”
The Q4FY22 results from ICICI Bank were in line with Edelweiss’ revenue and balance sheet growth forecasts.
However, a considerable PAT beat was achieved due to lower-than-expected credit costs. The bank’s core operating profit increased by 21% year over year, excluding dividend income from subsidiaries and associates.
Although the slippage ratio remained stable quarter over quarter, asset quality improved, with GNPA falling to 3.6 percent from 4.1 percent in Q3FY22.
“The bank should be re-rated due to its growth leadership, strong digital push, and concentration on risk-calibrated operating returns and best-in-class provision coverage. We keep our ‘BUY’ recommendation on the stock, with a target price of Rs 945 per share, representing a 26% upside,” Edelweiss analysts said.
ICICI Bank stock remains Kotak Securities’ top recommendation
ICICI Bank stock remains Kotak Securities’ top recommendation after delivering an extraordinary performance with a 60 percent year-on-year earnings increase led by about 20 percent year-on-year operational profit growth.
“It is one of the few large banks with a simple thesis ahead with no merger headwinds. We maintain BUY with FV at Rs 975,” the brokerage said.
According to analysts, the bank has made good success thus far and is in a strong position to multiply its profitability.
According to the brokerage, the bank will take the lead among the large banks due to steady returns and smaller profit shocks.
“The extent of differentiation in return ratios or growth is not that high but we believe that the scope for earnings upgrades would be higher in ICICI Bank over HDFC Bank,” said analysts.
“The bank is firing on all cylinders with a consistent combination of a high-yielding portfolio (retail/business banking) and a low-cost liabilities franchise, which is fueling sustained NII growth,” Motilal Oswal said in its research.
The bank’s business trends are expected to continue to improve in important categories such as retail, SME, and BB, according to the brokerage firm, while slippage reduction will assist lower the bank’s cost of funding.
“PCR remains one of the best in the market at 79%, and the additional COVID-19 provision buffer (90 basis points of loans) provides comfort,” the company noted.
It anticipates the bank to earn a return on assets of 1.9 percent and a return on equity of 16.3 percent in FY24, and it maintains a ‘buy’ rating with a target price of Rs 1,050 per share, representing a 40% upside.
ICICI Bank has consistently outperformed over the previous few quarters, according to Prabhudas Liladher analysts, with earnings quality rising each quarter.
In FY24, the brokerage company expects an RoE of 15.6 percent, vs 16.8 percent for HDFC Bank.
“We upgrade our SOTP-based target price to Rs 950 from Rs 906 per share, as valuation at 2.2x FY24 core ABV is attractive,” Prabhudas Lilladher said. The stock is still rated as a ‘buy’ by the brokerage.
Meanwhile, Emkay Research retains a ‘buy’ recommendation on ICICI Bank shares, with a target price of Rs 1,025 per share, representing a 37% gain.
Because of the favorable asset quality forecast, brokerage firm Nirmal Bang anticipates credit costs to continue to decline.
It retains a ‘buy’ call on the company with a target price of Rs 1,068 and has raised earnings expectations by 3%.