Our recent interaction with the management of ICICI Bank reinforces our positive outlook on the stock. We believe management’s focus on stable growth with improving structural profitability is likely to continue.
ICICI Bank has continued to demonstrate its prowess in improving ALM, maintaining robust liability franchise, managing asset quality risk along with conserving capital.
Retail segment has continued to show healthy growth while SME and domestic corporate books have seen calibrated growth. Its asset quality has stabilized; fresh loan impairments have also remained within the management’s guidance.
At CMP, stock trades at reasonable valuation (1.7x FY16E ABV), after stripping the value for subsidiaries. We have marginally revised earnings upward for FY15/16E along with assigning higher multiples for its core business as well as subsidiaries on improving macros.
We reiterate BUY on the stock with revised TP of Rs.390 (Rs.364) using SOTP method, where the value of its standalone business comes to Rs.314 (2.0x FY16E ABV) and the value of subsidiaries at Rs.76 (holding company discount: 20% to the fair value of its subsidiaries at Rs.94).
Saday Sinha, banking analyst, Kotak Securities