ICICI Bank
Reco price: Rs 694
Current market price: Rs 708.50
Target price: Rs 939
Upside: 32.5%
Brokerage: Kotak Securities
ICICI Bank’s (ICICI) loan growth slowed to 13.0 per cent y-o-y in Q1FY09 on the back of muted growth in the retail segment. Total deposits grew only 1.6 per cent y-o-y to Rs 2,34,460 crore in Q1 FY09. However, its low cost deposits (current and savings accounts) improved 500 bps from 22.4 per cent in Q1FY08 to 27.4 per cent in Q1FY09. This helped net interest income to grow by 41.3 per cent y-o-y to Rs 2,090 crore in Q1FY09.
Net profit declined 6.1 per cent y-o-y to Rs 728 crore in Q1FY09, partly on account of treasury loss of Rs 590 crore and increase in net NPA (1.74 per cent in Q1FY09 vis-à-vis 1.33 per cent in Q1FY08).
Its subsidiaries, namely ICICI Prudential Life Insurance, ICICI Lombard General Insurance, ICICI Securities, Prudential ICICI AMC and ICICI Venture Fund Management continue to be dominant forces in their respective fields and are adding significant value to ICICI’s stock.
At Rs 694, the stock is trading at 16.1x FY10E earnings and 1.6x its FY10E adjusted book value. Due to increase in net NPA, the brokerage has revised its earnings estimates, resulting in an EPS of Rs 34.4 and Rs 43.1 for FY09E and FY10E, respectively. Valuing the subsidiaries at Rs 348 (20 per cent discount to their combined fair value of Rs 435), the SOTP price target for the stock comes to Rs 939 (lower than earlier target of Rs 1,095).
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