LKP Securities has given a ‘Buy’ rating on CSB Bank with a target price of Rs 313, suggesting a potential upside of 25 per cent from the brokerage’s calculated market price of Rs 251. The target price of Rs 313 is 13.82 per cent higher than the private lender’s one-year high level of Rs 275, hit on December 19 last year. LKP Securities said decent credit growth, asset quality and lower credit costs may help the lender to deliver a ROA (Return on asset) and ROE (Return on equity) of 2.1 per cent and 18.7 per cent, respectively, for FY24E.
“The bank is well equipped to report superlative return ratios (FY24E ROA/ROE of 2.1 per cent/18.7 per cent) driven by better operating performance, balance sheet growth and improving asset quality. The stock trades at 1.2x FY24E Adj. BVPS of Rs 209. We value the bank at 1.5x FY23E Adj. BVPS and arrive at a price target of Rs 313; a potential upside of 25 per cent,” the brokerage said in its fresh report.
On the asset quality front, CSB Bank has done tremendous improvement, it added. “The GNPA (Gross non-performing asset) ratio declined to 1.7 per cent in previous quarter from the peak of 7.9 per cent in FY18,” LKP said.
It further stated that credit cost stayed low owing to provision write-backs and additional contingent buffers.
LKP also said the lender’s “gold loan book (43.7 per cent of loans as on 2QFY23) has witnessed a robust growth of 50.8 per cent YoY and accounted for 74 per cent of the incremental sequential credit growth.”
Share of the gold loan portfolio has increased from 36 per cent in 2Q FY22 to 46 per cent in recent quarters, the brokerage mentioned.
CSB Bank shares have slipped 2.45 per cent over the past one year. Today, the stock slipped 2.11 per cent to hit a day low of Rs 246 against its previous close of Rs 251.30.
A total of 22,000 shares changed hands today with a turnover of Rs 55.72 lakh. The company’s market capitalisation (m-cap) stood at Rs 4,279.03 crore.
“CSB Bank looks bearish with massive resistance at Rs 264 on the daily charts. A close below support of Rs 243.4 could lead to a lower target of Rs 223-214 in the near term,” said A R Ramachandran from Tips2trades.
The stock was last seen trading higher than 5-day, 20-day, 50-day, 100-day and 200-day moving averages.
CSB Bank’s 14-day relative strength index (RSI) came at 53.16. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 8.48.
Meanwhile, Indian equity benchmarks fell sharply in late morning deals, extending their fall for the third straight session as banks, financials and technology stocks dragged.