Rakesh Jhunjhunwala stock: This private lender shares touch 3-year high amid strong Q1 results – brokerages see up to 44% upside

Rakesh Jhunjhunwala stock: Billionaire investor Rakesh Jhunjhunwala-backed Federal Bank shares touched a three-year high to Rs 109.40 per share, after surging over 2 per cent on the BSE intraday on Wednesday. The stock has traded at its highest level since July 2019 and hit a new high of Rs 128 apiece on October 17, 2017. 

The stock has gained nearly 12 per cent in the last four sessions after the bank reported healthy earnings led by strong business growth in the first quarter of the financial year 2022-23 (Q1FY23). 

The private sector bank shares have rallied nearly 20 per cent in the past one month outperforming the market, as in comparison BSE Sensex grew by around a 7.5 per cent rise during the same time. 

Rakesh Jhunjhunwala, who is called as Big Bull of the Indian stock market, along with his wife Rekha Jhunjhunwala holds a 3.65 per cent stake in Federal Bank, as per the March 2022 BSE shareholding pattern of the company. The private lender has yet not file June shareholding pattern data. 

The bank’s Q1FY23 earnings beat estimates on the back of strong loan growth, incrementally better margins and negligible treasury losses, resulting in healthy PPOP accretion, HDFC Securities said. It further said that the overall asset quality improved sequentially, and partly offset by slippages from the restructured portfolio, translating into low credit costs. 

HDFC Securities raise FY23E/FY24E earnings estimates to factor in higher loan growth and lower credit costs while maintaining a Buy rating with a revised target price of Rs 132 per share, implying an upside of over 34 per cent from the current market price. 

Similarly, YES Securities too being bullish on the stock, maintained a Buy rating on the private bank with a revised price target of Rs 142 per share (44% upside), valuing the standalone bank at 1.2x FY24 P/BV for an FY23E/24E/25E RoE profile of 13.5/14.4%/15.4.