This Rakesh Jhunjhunwala's stock hits fresh 52-week high after healthy Q2 results

This Rakesh Jhunjhunwala's portfolio stock has hit a fresh 52-week of Rs 107.65 in Monday's intraday on BSE. Federal Bank shares surged in the early hours trade after posting nearly 50% jump in September quarter results.  

Federal Bank stocks recorded 2.02 times spurt in volumes to clock its new high on Monday. The banking shares were trading marginally up by Rs 1.75 or 1.68% at Rs 105.80 around 12 noon.  

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The banking shares were also one of the top contributors, alongside ICICI Bank and Axis Bank, pushing Nifty Bank to a record high this morning. Nifty Bank surpassed even 40,400-mark around this time to create a new high of 41,472.70.   

Big Bull Rakesh Jhunjhunwala holds 3.7% stake in Federal Bank after the Indian billionaire increased his stake in the banking stock by 0.9 per cent in the quarter ended September 30, 201, showed the BSE latest shareholding data.  

Emkay maintains buy rating, revises target price  

Meanwhile, good results posted by the private bank also led brokerage Emkay Global Financial Services Limited to give a buy rating with an upside of 25.1%. With the CMP of Rs 104 as on October 22,2021, the brokerage pegged Federal Bank shares target price of RS 130 in 12 months.  

It said transformation into neo-gen private bank, better RoAs will aid re-rating of the private lender.  

"Federal Bank (FB) continued to report healthy in-line PAT of Rs4.6bn (est: Rs4.5bn), driven by contained provisions and recovery from DHFL, partly offset by higher opex. Headline asset quality improved as GNPA was down 26bps qoq to 3.2%, but restructuring was slightly higher than expected at Rs34bn or 2.6% of loans. FB remains our preferred pick in the small/mid-cap space, given its better liability/asset quality profile, management stability, digital adoption and expected improvement in return ratios. Maintain Buy with a revised TP of Rs130, rolling forward to 1.2x Dec’23E ABV (vs. 1x Sep’23E ABV earlier). Potential value unwinding in subsidiary FedFina adds to the comfort," said the brokerage.  

Outlook and valuations:  

The brokerage estimated the bank’s RoA/RoE to improve to 0.9-1.1%/11-14% over FY22-24E from 0.8%/10% in FY21, driven by better margins (led by higher share of retail portfolio, including CV, MFI, PL and Card), structural improvement in cost ratios due to digital adoption and lower LLP.  

Key risks:  

Emkay feels impact on growth/asset quality, if any, of recent floods in Kerala and higher-than-expected relapse rate in the restructured pool could impact the bank's growth negatively.   

Federal Bank Q2 results 

The private sector lender on Friday reported a 50 per cent jump in its standalone profit after tax at Rs 460.26 crore in the quarter ended September 2021, said a PTI report. The lender had earned a profit after tax of Rs 307.62 crore in the corresponding quarter of the previous fiscal.  

“The bank, amidst the volatile environment, has delivered a very encouraging performance braving a lot of odds. We witnessed strong traction in NIM and pick up in NII on the back of good credit growth in certain segments. Strong recovery and upgrades helped in virtually no credit cost for the quarter,” CEO Shyam Srinivasan, Managing Director, Deral Bank, told the news agency.