Federal Bank:
This is again a ATH break out, Fundamentals improving, sector tailwinds entry. I have entered the stock around 129 with a stop loss of 115 & a target of 180 ish to begin with.
Once the target is reached, idea is to exit or continue to hold if Fundamentals improve as banking sector could be on upswing post COVID for 3-5 years. Price will of course discount this in 2-3 years.
Fundamentals:
FY23E closing estimates:
ROE: 14%
ROA: 1.2
PCR: 70%
Credit Costs: 60 bps
NNPA: 0.8%.
NIM: 3.3%
CASA: 38%
Loan growth: 20%.
For the above quantitative metrics, forward P/BV of 1.2 is inexpensive.
At technical targets of ~ 180, the P/BV comes to around 1.5 which is fair for the bank. So, as these factors coincided made me bullish for a decent allocation.
Management earnings call indicates that the above metrics are a base and can improve in the coming years. I think too many macro events have come in the way for Federal bank thus far for the market to remain sceptical on the bank.
For some of the technical entries, I have trimmed exposures to Dmart, Kotak, Page, PB Fintech (Stop loss hit).
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