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Centrum Wealth Research
RBL Bank (Buy)
CMP: ₹526
Target Price: ₹600
RBL Bank maintained stable NPAs. Gross NPA at 1.40%, as of 30 Sept’18 along with continued robust advances growth of 36.6 per cent YoY. The net interest income (NII), pre-provisioning profit (PPP) and net profit grew 41.1 per cent, 48.1 per cent and 35.8 per cent, respectively, on YoY basis in Q2FY19.
Overall business grew 33.5 per cent to ₹93,663 crore as on 30 Sept’18. As a big relief from one of the major concerns, the management clarified that their total direct exposure to IL&FS close to mere ₹15 crore as a performance guarantee which is fully cash collateralised.
Post our last update (Q1FY19 on 27 July @ ₹568), the stock of RBL Bank declined 23 per cent to a low of ₹439 per share. However, post the good results, the same has recovered ~17 per cent and is now trading at 3.0x/2.6x its FY19E/20E adjusted book value.
Further decline in NPAs and robust business growth - CAGR of 37% over FY18-20E, are expected to improve return ratios –1.51% RoA and 18.2% RoE by end FY20E. Hence, we remain positive on the stock of RBL Bank, with a target price of ₹600, valuing it at 3x its FY20E ABV.
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