Share Market Tips
RBL Bank, Prabhat Dairy among top 10 stocks that could return up to 60%
RBL Bank is likely to see improving return profile over the next couple of years, due to improving advances & loan mix, higher CASA, lower cost ratios and improving asset quality
The market is continuing to correct and consolidate after hitting record highs last week dragged by concerns like weak rupee and higher crude prices, which may impact the country's current account deficit and economic growth.
The Nifty has so farlost more than 200 points and the Sensex around 700 points from their record highs of 11,760.20 and 38,989.65, respectively, hit on August 29.
Experts suggest that the correction was due as the indices had rallied more than 10 percent year-to-date.
Crude oil prices have rallied nearly 23 percent year-to-date to USD 79 a barrel since August 15, while Indian rupee has fallen nearly 12 percent year-to-date against the US dollar.
The ongoing depreciation has room till 73, but the journey till there is less likely to be steep because of the ongoing trade war tensions, and a higher likelihood of only a gradual US rate hike will ensure that we may not have any runaway rally in US dollar or weakness in rupee.
RBL Bank (one of the fastest growing private banks) is likely to see improving return profile over the next couple of years, due to improving advances & loan mix, higher CASA, lower cost ratios and improving asset quality.
We expect the bank to report industry-leading loan CAGR of around 31.5 percent over FY18-20E. We forecast revenue and PAT CAGR of 27.5 percent and 36.8 percent, respectively, over FY18-20E.
We forecast return on assets (RoA) and return on equity (RoE) will increase by 24 bps and 317 bps to 1.4 percent and 14.6 percent, respectively, over FY18-20E. Considering the multiple levers, we value the stock at 3.6x FY20E P/ABV to arrive at the 12-months target price of Rs 739.
Karur Vysya Bank will benefit from its digital banking initiative, asset quality improvement, and advances growth. Further, improving loan mix, higher CASA, lower cost ratios to also support its return profile.
We forecast its RoA & RoE to increase by 48bps and 540bps to 1 percent and 11.5 percent, respectively, over FY18-20E. KVB is currently trading at around 1.5x FY20E P/ABV, which is attractive from a risk-reward point of view.source- www.moneycontrol.com
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