Federal Bank Research Report By ICICI-Direct

Higher slippages have been hurting earnings in the past couple of quarters. However, the pace of slippages has pared down, which remains encouraging. However, future asset quality trajectory needs to be watched, especially in the wake of increasing corporate exposure. Factoring in higher balance sheet growth, we have revised our earnings estimate and expect PAT CAGR at 52% in FY17-18E. RoA is expected to inch up to 1% in FY18E. Consequently, we revise our target price upwards to Rs 87 from Rs 80 earlier, as we assign higher multiple of 1.75x FY18E ABV. Consequently, we upgrade our rating on the stock to BUY.