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CLSA has a price target of ₹220 on the stock and had an earlier rating of “outperform.” CLSA’s price target implies a potential upside of 60% from Thursday’s closing levels.
Calling Bandhan Bank a play on the MFI recovery cycle with a gradual migration to secured loans, CLSA cited the new management’s intention to increase the share of secured loans to 55% to 60% from the current level of 50%.
The brokerage said that there are early signs of improvement that are visible in collection efficiency and Bandhan Bank is well positioned to benefit from this.
Bandhan Bank’s asset quality cycle is better than peers, according to CLSA, who also said that with the entire management team being new, it does not see the risk of “kitchen-sinking.”CLSA has upgraded Bandhan Bank following a 20% correction over the last three months.
Bandhan Bank is expected to deliver Return of Assets (RoA) of 1.5% to 1.6% over the medium-term, which is similar to Axis Bank, the CLSA note said.
Out of the 28 analysts that have coverage on Bandhan Bank, 15 of them have a “buy” rating on the stock, eight say “hold”, while five of them have a “sell” rating.
Shares of Bandhan Bank are trading with gains of 3% at ₹140.55. The stock is down 81% from its 2018 peak of ₹741.
