Federal Bank outperforms Sensex by more than 45% since January: 30% upside still says Jefferies

By: | Published: September 4, 2017 11:45 AM

Federal Bank shares which have returned more than 64% in the year so far are still undervalued says global banking firm Jefferies.

Federal Bank shares were trading at Rs 111.90 up by more than 1.77% since the previous close. (Image:Reuters)

Federal Bank shares have soared more than 64% in the year so far. In the same period BSE Sensex has returned just 20%. While some investors may believe that the stock is overvalued at these levels Jefferies LLC, an American global investment bank says that the stock is a buy at these levels. According to the investment banking firm, the target price for the stock is at Rs 140. The stock was trading at Rs 111.90 up by more than 1.77% since the previous close. Jefferies says that the Asset Quality improvement for the bank will drive returns going forward. For the quarter ended June-17, gross NPA for Federal Bank stood at ₹1,867.94 crore.The net NPA stood at ₹1,061.26 crore, and the net NPA percentage to net advances at 1.39 per cent.

Both gross and net NPAs in the quarter improved significantly to 2.42 per cent from 2.92 per cent in the first quarter of the last fiscal. Riding on the comfort of overall credit growth,the Kerala-based bank posted a 26 per cent surge in net profit at ₹ 210.15 crore in the first quarter of FY17.

The shares have seen a slight correction in the last one month, with the shares registering negative returns of 4% in the last one month. The shares are down by more than 5% in the last three month period. The BSE Midcap index is up by more than 6% in the last three months.

The stock has outperformed the BSE Bankex as well as BSE Mid cap index in the one year, three year, five year and ten year periods. Another midcap stock, Dalmia Bharat, which has been a consistent outperformer with returns of more than 100% in the year so far is still a buy according to Goldman Sachs. The stock was trading at Rs 2,700 on NSE this morning. Goldman Sachs has target of Rs 3,050 per share in the near term. According to multinational finance company, the medium term outlook for the cement industry looks positive.

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