Extending their bull run, shares of RBL Bank rose 2.42 percent to reach a new 52-week high of ₹177.2 apiece during Thursday's trade. In the last one month, the stock has climbed from ₹152.85 to its current price of ₹176.70, yielding a return of nearly 15.60 percent.
From the June low of ₹74.15 a share, the stock steadily increased to ₹176 levels, generating a return of 138.30 percent, while YTD, the stock has gained 38.81 percent as compared to the Nifty Bank's returns of 20.73 percent.
The stock picked up steam after the bank's profit exceeded analysts' expectations. Since the release of its second-quarter results on October 22, the stock has rallied 42.56 percent to date. On the technical charts, the stock is trading 45 percent above its 200-DMA and 18.36 percent above its 50-DMA.
Despite such significant gains, domestic brokerage firm Ventura Securities believes the stock still has the potential to rise further. The brokerage, in its November report, initiated coverage on the stock with a target price of ₹256.2 per share.
According to the brokerage's bull case scenario, RBL's stock price is projected to scale to ₹389.5/share. The brokerage expects an AUM of ₹95,000 crore in FY25, a CAGR of 15.3 percent over FY22–25, and NIM of 5.7 percent.
Under the Bear case scenario, the stock is anticipated to drop to ₹124.6 per share.
RBL is now expected to slow down provisioning, given a comfortable PCR and no major expectation of slippage in asset quality, leading to a turnaround in profitability, the brokerage stated.
RBL’s management is looking to scale up its secured retail portfolio (affordable housing and low-cost mortgages) to reduce the risk in its business model. The management intends to add 80–100 branches per year in the future, it said.
“We expect retail loans to constitute 58% of the total loan book by FY25. Acceleration in retail lending can lead to a re-rating of the stock,” said Ventura Securities.
For the September quarter, the bank reported a better-than-expected net profit of ₹202 crore, as against a net profit of ₹31 crore in the year-ago quarter. The bank's strong profits were attributed to a massive drop in provisions.
The bank's revenue grew 9 percent to ₹1,648 crore, driven by a 16 percent uptick in net interest income at ₹1,064 crore and a net interest margin of 4.55 percent. While, the other income declined by 2 percent to ₹583 crore as the bank had taken a minor hit on the Treasury side.
On the asset quality front, RBL Bank's gross NPA stood at 3.08 percent in the quarter as against 4.08 percent in the previous quarter, while net NPA rose to 1.16 percent on a sequential basis. The bank's fresh slippages during the quarter came in at ₹746 crore, while net slippages were ₹498 crore.
“Advanced growth of 17% is sustainable, and we aim to grow by more than 20% starting next fiscal year,” said R Subramaniakumar, MD of the bank.
17 analysts polled by MintGenie on average have a 'hold' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.