Jefferies initiates coverage on IDFC First Bank with a ‘buy’, sees over 15% upside – 3 reasons why
₹100, indicating a potential upside of over 15 percent from today's (April 10) closing price of ₹84.71. "IDFC First Bank has built a well-rounded platform, arguably among the most improved deposit franchises. Operational efficiencies will play out from H2FY25, and over FY24-27 strong deposit growth will aid loan growth that should aid 28 percent EPS CAGR even as credit costs rise.
Improving ROA (to 1.5 percent) and ROE (to 14 percent) will aid rerating. A fall in rates should help it more than peers. The ability to raise capital will be key.
We initiate coverage with a Buy rating and PT of ₹100," said the brokerage. It also noted that the lender's strong earnings growth and improvement in profitability should drive a re-rating as valuations are reasonable at 1.5x FY25 adj PB. Furthermore, IDFC First Bank's ability to raise capital will be a key enabler as CET1 CAR is relatively lower at 14 percent, ROE is lower and loan growth is higher.
Jefferies also factors in two capital raises in FY25 and FY27. IDFC First Bank stock has jumped over 52 percent in the last one year but has lost 5 percent in 2024 YTD, giving negative returns in 3 of the 4 months so far this year. It has gained 12 percent in April so far after a 7 percent fall in March, 4 percent in February and 5 percent in January 2024.
Currently, the stock is over 16 percent away from its record high of ₹100.74, hit on September 5, 2023. Meanwhile, it has advanced 58 percent from its 52-week low of ₹53.35, hit on April 12, 2023. Full suite banking and most improved deposit franchise: The brokerage pointed out that IDFC First Bank has built an end-to-end banking platform that straddles a broad range of customers and products along with robust tech platforms and
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