Brokerage firms continued to remain positive on Karur Vysya Bank Ltd following its Q2 results. The analysts mostly have a positive view on this multibagger and see up to 45 per cent upside potential in this counter on the back of strong operational performance, growth outlook and improving asset quality.
Karur Vysya Bank (KVB) reported a net profit of Rs 473.60 crore for the September 2024 quarter, increasing 25.1 per cent on a year-on-year (YoY) basis. This growth reflects the bank’s improved performance across key financial indicators. The total income for Q2FY25 stood at Rs 2,856 crore, rising 22 per cent YoY.
Operating profit before provisions and contingencies reached Rs 816.24 crore, surging 28 per cent YoY. The bank’s asset quality improved significantly during the quarter. Gross NPAs reduced to 1.10 per cent from 1.73 per cent, while NNPA were at 0.28 per cent from 0.47 per cent a year ago.
Karur Vysya Bank continues to deliver strong earnings growth with PAT and peer-best RoA at 1.7 per cent, driven by strong and stable margins 4.1 per cent, contained opex, and higher recoveries. Credit growth moderated due to the bank’s strategy to pull-out from the low yielding corporate book and deceleration in the PL/VF book, said Emkay Global Financial Services.
"We largely retain our earnings estimates, and expect the bank to continue delivering superior RoA/RoE over FY25-27. We retain 'buy' with revised target price of Rs300 (earlier Rs 275), rolling fwd at 1.6t times Sept-26E ABV. KVB remains our top pick among small and midcap private lenders given strong RoA, asset quality, capital/provision buffers, and management stability," it added.
Stable NIM and strong traction in non-interest income led to KVB’s sturdy Q2 operating performance, which, combined with moderate provisions kept profitability strong, with 1.72 per cent RoA, said Anand Rathi. With credit growth likely in high-teens and modest credit costs, earnings are expected to be strong, it said.
Overall asset quality improved and strong credit growth in core retail and SME segments; moderate slippage; NIM persisting above 4.1 per cent; and a strong balance sheet were key positives. We retain our Buy rating, with a higher target price of Rs 290, 1.5 times P/ABV on the FY27e book, it said.
Shares of Karur Vysya Bank 4 per cent dropped nearly 4 per cent to Rs 208.50 on Friday, with its total market capitalization falling below Rs 17,000 crore mark. The scrip had settled at Rs 216.85 on Thursday. Emkay's target price of Rs 300 suggests an upside potential of 45 per cent in the stock.
Shares of Karur Vysya Bank have zoomed nearly 10 times from its Covid-19 lows. The stock has gained nearly 45 per cent in the last one year, while it is up 25 per cent in 2024 so far. The stock is up about 15 per cent in the last six months.
YES Securities said that annualised gross slippage ratio continues to be maintained below 1 per cent albeit at a level slightly higher than FY24, while NIMs were broadly stable on sequential basis, maintained above 4 per cent and guided to remain so. Loan growth outcome and outlook also remained broadly stable, it said with a 'buy' rating on KVB with a revised price target of Rs 270.
On the other hand, HDFC Securities said that Karur Vysya Bank marginally beat estimates, benefitting from a strong operating performance, partly offset by a moderate rise in credit costs. "While we expect adverse impact on NIMs from higher cost of deposits, and likely rate cuts during H2FY25," it added with an 'add' rating on the stock with a target price of Rs 240.