Karur Vysya Bank - Target price of Rs. 590 - Dolat Capital

Karur Vysya Bank's focus on growth driven by segments where they have deep customer knowledge and maintain asset quality is encouraging.

- The fresh NPL formations which had remained high for the past couple of quarters have started trending downwards. The stress levels in sectors such as textiles, where KVB has sizable exposure has come down albeit moderately. Also in other segments, the bank is not seeing any major stress.

- NIM could see some pressure in the near term, but as deposit rates are expected to soften from 2HFY14, NIM should start stabilizing.

- We maintain KVB's loan book to grow at 25% CAGR during FY13-FY15E with key focus area continuing to be retail trade, whole-sale trade, SME and agriculture sectors.

- Current valuation at 1.4 x on FY14E BVPS forecasts in attractive. Our target of Rs. 590 is based on PBR of 1.8x on FY14E BVPS forecast.

Source : Equity Bulls

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