Every Monday, the Axis Direct comes up with the weekly recommendations known as Axis Direct Pick of the week. These weekly recommendations are backed up by in depth research from Axis Direct. Because of their very efficient research team, it is often seen that these weekly recommendations perform very well and often outperform the benchmark index. Let us have a detailed look into the Axis Direct Pick of the week for the week starting 4th September 2017.
Axis Direct Pick of the week –
Federal Bank – This week, starting from 04.09.17., the Axis Direct has picked federal bank on the basis of fundamental analysis. The recommended stock is expected to perform within a 6 month period and reach the target by that time.
Federal Bank’s price as of 01.09.17. was Rs 110. Within the stipulated timeframe, the stock is expected to go up 10% reaching the target of Rs 121. Federal Bank has a market capitalization of Rs 21,421 crores. The research team has recommended buying the stock. With the investment horizon of 6 months, the stock is expected to give 10% return on investment which can be annualized to 20% ROI.
Rationale behind the recommendation –
- The latest annual audit report showed 15.6% YOY (year on year) growth.
- Robust income growth at 38% YOY.
- 27% increase in core fees and treasury gains.
- Provisions for the quarter went up to Rs 236.4 crores which show a 40.3% gain on year on year basis.
- GNPA ratio improved by 50 bps YOY. The GNPA came down to 2.42% in fiscal 18 compared to 2.92% in fiscal 17.
- The new corporate banking team of Federal Bank is expected to keep the present momentum growing and is expected to give a boost in the business at corporate banking sector.
- A total growth of 18% CAGR (compounded annual growth rate) is expected to be maintained all through fiscal 17 to fiscal 19 backed by overall growth in corporate, SME and retail banking.
- The dynamic management of Federal Bank has focused on containing slippage from corporate books, reduce the cost of borrowing and growth in lending in both corporate and retail sector.
Disclaimer – Views expressed in this review is an educated guess made on the basis of available data from open source expressed for the purpose of knowledge sharing. By no means, it should be taken as an investment advice or recommendation. Investor/ trader should invest money at their own risk.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.