ICICIdirect has recommended 'Hold' on South Indian Bank with target price of Rs 30 as against current market price (CMP) of Rs 33 in its report.
Commenting on the investment rationale, the stock broker said, ''South Indian Bank's (SIB) results were below our estimates as credit growth was sluggish at 9% YoY while a 12 bps decline in yield on advances resulted in mediocre 4% YoY NII growth to Rs 3.4 billion.
Asset quality deteriorated as GNPA increased from Rs 4.33 billion to Rs 5.17 billion. Fresh slippages were high at Rs 975 million in Q1FY15. NNPA stood at Rs 310.5 (0.9% of credit). Fresh restructuring, however, was lower at Rs 960 million against Rs 2.23 billion in the last quarter.
At the CMP, SIB trades at a reasonable valuation at 1.2x its FY16E ABV. It is trading at a discount to peers as its RoA is low at 0.9% and has a restructured book of Rs 16.61 billion (4.8% of credit). No immediate improvement in return ratios is seen as PAT growth is modest at 11% CAGR to Rs 6.24 billion over FY14-16E."
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