Shares of the private sector lender, Federal Bank, have rallied 22.52% in the last one month, which is 10.95 per cent higher than the Bank Nifty, which returned 11.17 per cent in the same time. The stock is currently trading 38.32% above its 52-week low of Rs. 77.5. The latest up move in the stock started after the bank released its business update on July 3.
On July 15, Federal Bank posted an impressive 64 per cent year-on-year surge in net profit at ₹600.66 crore for the first quarter of the financial year as against ₹367.29 crore in the corresponding quarter of the preceding fiscal.
Total income during April-June 2022-23 rose to ₹4,081.48 crore from ₹4,003.97 crore in the same quarter of the previous fiscal year.
The interest earned for the quarter rose 8.14 per cent year-on-year to ₹3,628.86 crore as against ₹3,355.71 crore in the corresponding quarter last year.
Net interest income for the June quarter was ₹1,605 crore, up from ₹1,1418 crore the previous year. The bank's gross non-performing assets came in at 2.69 per cent in the June-ending quarter compared to 2.80 per cent in the March quarter.
The bank's provisions for bad loans and contingencies came down to ₹166.68 crore in the quarter under review from ₹639.94 crore parked aside for the year-ago same quarter.
Since its Q1 result announcement on July 15, the stock has gone from ₹97.20 to ₹105.20 levels, delivering a return of over 8.23%.
After a solid Q1 result, several brokerages turned bullish on the bank. Brokerage firm Motilal Oswal Financial Services has maintained a 'buy' call on the stock with a target price of ₹130, implying a 21.26 per cent potential upside from the July 22 closing price.
According to HDFC Securities' research report, the Federal bank has outperformed earnings estimates due to strong loan growth, improved margins, and negligible treasury losses.
HDFC Securities raised its FY23E/FY24E earnings estimate to account for higher loan growth and lower credit costs, it maintained a 'buy' rating with a revised target price of ₹132/share, implying a 23.13 per cent increase from the previous close.
Further, Prabhudas Lilladher has also maintained a 'buy' call on the stock with a target price of ₹135/share. It expects a 20% CAGR over FY22–24E and said credit quality would remain resilient.
According to media reports, Jhunjhunwala along with his better half, Rekha holds 75,721,060 equity shares in the bank, which translates into a 3.7 per cent stake as per the latest shareholding pattern.
An average of 28 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.