This Jhunjhunwala stock hit record high in early deals; more upside ahead?

Shares of Federal Bank Ltd hit an all-time high today amid the broader indices scaling their all-time highs for the second consecutive session. Federal Bank shares touched a record high of Rs 158.05, rising 2.59% in early deals today against the previous close of Rs 154.05 on BSE. Market cap of the bank rose to Rs 38,295 crore. Federal Bank stock has risen 15% in a year and gained 14.71% since the beginning of this year. The banking stock has a one-year beta of 0.1, indicating high volatility during the period.

Rekha Rakesh Jhunjhunwala, wife of late investor Rakesh Jhunjhunwala, held 4.82 crore shares or 2.01 per cent stake in the public sector lender as on October 11, 2023. On the other hand, data showed 2.45 crore shares or 1.02% were displayed as stake in the name of late Rakesh Jhunjhunwala.

Total 4.76 lakh shares changed hands amounting to turnover of Rs7.47 crore on BSE.

In terms of technicals, the relative strength index (RSI) of the stock stands at 64.1, signaling the stock is neither oversold nor overbought. Federal Bank shares are trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Nomura has assigned a price target of 190 for the next 12 months, a potential upside of 20% from the current levels.

Nomura expects the lender to deliver a 22% Compounded Annual Growth Rate (CAGR) in its Pre-Provisioning Operating Profit over financial year 2024 - 2026.

The brokerage has valued Federal Bank at 1.2 times December-2025 Price-to-book-value, with its subsidiaries contributing 8 per share.

Brokerage Sharekhan has a target price of Rs 170 on the banking stock.

“We reiterate a Buy on Federal bank with an unchanged price target of Rs 170. The bank is likely to sustain a RoA of over 1.2% led by strong loan growth, healthy fee income and benign credit cost despite NIM pressure in near term, which should translate into normalised RoE of 15%,” said the brokerage.

ICICI Securities has a revised its target price to Rs 175 (earlier Rs 155), valuing the stock at 1.3 times FY25E ABV (1.2x earlier).

Post Q2 earnings of the lender, the brokerage said, “We raise our growth forecast and estimate the bank to deliver 18%/16% YoY growth for FY24/25. We expect the bank to report steady 1.2% RoAs for FY24–25E with strong fee income broadly offsetting marginal decline in NIM.”

The lender reported better-than-expected earnings for the quarter ended September 2023. Net profit climbed 35.56% to Rs 954 crore in Q2 against the profit of Rs 703.7 crore in the September quarter of 2022. The bank logged highest ever quarterly profit in Q2.

Net interest income came 16.7% higher at Rs 2056.4 in Q2 against Rs 1761.18 crore in the September quarter of the previous fiscal. NII too was the highest in the last quarter.

Deposits grew 23% to Rs 2.32 lakh crore in the last quarter against Rs 1.89 lakh crore in the September 2022 quarter. On a quarter on quarter basis, deposits rose 5% from Rs 1.89 lakh crore in Q1 of the fiscal.

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