Federal Bank - Performance on track - Kotak

Our recent interaction with the management reconfirms our faith in Federal Bank, which is one of our preferred ideas in mid-caps. The bank is wellplaced to deliver above-average earnings growth led by (1) solid revenue growth (NIM expansion), (2) marginal improvement in cost ratios and (3) stable credit costs resulting from lower risk to sharp rise in impairment ratios. We see RoEs moving to ~14-16% by FY2015-16E, which could result in valuation expansion from current levels.

We revise earning estimates upwards and maintain BUY with TP at Rs. 90 (from Rs. 85 earlier).

Source : Equity Bulls

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