Multibagger stock: Unlike other PSB peers, Indian Bank has never reported a single rupee of loss in the last decade despite plethora of credit challenges in the industry
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Multibagger stock: Despite surge in Indian Bank share price to the tune of near 115 per cent in last one year, HDFC Securities retail research desk has given buy call on the PSU bank shares. The retail research team of HDFC Securities has said that Indian Bank share price may go up to ₹170.50 per equity share in two quarters from its current market price. In fact, it has recommended investors to keep on accumulating till ₹121 levels.
Highlighting the Indian Bank fundamentals that may continue to fuel its stock price rally in next two quarters; HDFC Securities research says, "Indian Bank has remained profitable despite higher provisioning requirement indicating that its asset quality is superior to some of the other PSU banks, which have required huge infusion of capital. Unlike other PSB peers, Indian Bank has never reported a single rupee of loss in the last decade despite plethora of credit challenges in the industry. In fact the bank has distributed dividend to its shareholders seven times in past ten years."
Expecting benefit for Indian Bank from recent guarantee on bad bank announced by the central government, the HDFC Securities research report said, "Recent announcement of the Union Cabinet’s approved of Central Government guarantee of up to ₹30,600 Cr to National Asset Reconstruction Company Limited for five years will be positive for large PSU banks. Faster resolution by the IBC could also help in recoveries and bring down slippages in future. Privatization buzz has kept the PSU bank sector in limelight and we believe acquisition of some PSU Banks by the any prestigious corporates/Institutions – local or foreign - at a good valuation may rerate the sector."
Detailing Indian Bank's valuations; HDFC Securities said, "We expect Indian Bank to grow its loan book at 9 per cent CAGR while NII and Net profit are expected to grow at 7.5 per cent and 39.5 per cent (due to lower base) CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.8 per cent in FY23E from current 0.6 per cent in FY21 and RoE could rise to 12.4 per cent from 9.9 per cent in FY21. We expect healthy recoveries and upgrades in next two years."
On its view on Indian Bank shares, HDFC Securities said, "We believe that investors can buy Indian Bank at last traded price and add more at ₹121 for the base case fair value of ₹158 and for the bull case fair value of ₹170.5 apiece over the next two quarters."
Indian Bank shares are one of the multibagger stocks in 2021 as it has surged from ₹62.30 per equity share to ₹136.50 per stock levels today (at 2:10 PM at NSE).
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.