Target: ₹360
CMP: ₹304.55
Karur Vysya Bank has reported another strong quarter, with RoA at 2.1 per cent, driven by 26 bps q-o-q NIM expansion, healthy two quarter recoveries and controlled opex (-5 per cent y-o-y). The bank also created ₹160 crore contingent provisions towards identified sectors.
Management has guided FY27 NIMs at about 3.8 per cent (FY26: 4 per cent), slippages below 1 per cent, loan growth at about 2 per cent above industry and RoA at 1.8 per cent. While management guided cautiously on FY27 NIMs amid competitive pressure on yields and upward repricing of term deposits, we believe Karur Vysya Bank can outperform guidance. Availability of ECLGS 5.0 should also help keep slippages contained, while the bank remains comfortably placed on ECL transition.
With FY26 exit-quarter NIMs at 4.2 per cent (4 per cent calc.), Karur Vysya Bank appears well placed to exceed our earlier FY27 RoA estimate of 1.7 per cent. We therefore raise FY27 NII estimates by 1.5 per cent and reduce opex estimates by 3 per cent, resulting in a 6/7 per cent increase in PPoP/PAT estimates. We now build FY27 RoA at 1.8 per cent vs 1.7 per cent earlier.
Given the stronger-than-expected RoA trajectory, we raise our target multiple to 1.8x (vs 1.6x earlier), increasing the Mar’27 target price to ₹360 (vs ₹310 earlier). Retain Long.