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Buy South Indian Bank; target Rs 30.2: Aditya Birla Money

Posted by sandhyaravii on June 18, 2012

Aditya Birla Money has retained `Buy` on South Indian Bank (SIB) with a price target of Rs 30.2 as against the current market price (CMP) of Rs 24 with upside potential 25.8% in its report dated June 13, 2012. The broking firm gave following investment rationale on the stock:

We estimate SIB to report an EPS CAGR of 19.0% over FY12-FY14E. ABV is estimated to grow at 19.3% CAGR during the same period.

The stock currently trades at 0.9x FY14E ABV and 4.8x FY14E EPS. Going forward, we expect the bank’s margins to come under slight pressure given the bank’s increased focus towards low yielding corporate segment.

We expect the bank to deliver healthy net interest income growth (CAGR 22.3% over FY12-14E) and earnings growth (CAGR 19.0% over FY12-14E) driven by strong traction in business growth and stable asset quality going forward.

We retain our Buy rating on the stock with a target price of 30.2 (1.15x FY14E ABV), thus giving an upside potential of 25.8% from current levels.



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