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Bandhan Bank gets a buy tag from Goldman on attractive valuation

April 12, 2023

Bandhan Bank gets a buy tag from Goldman on attractive valuation
Following a recent decline in the stock price, Goldman Sachs has upgraded its rating on Bandhan Bank from ‘neutral’ to ‘buy’. The brokerage firm sees this correction as an opportunity, as it has made the stock’s valuations more attractive.

The stock has declined nearly 22 percent since October 2022 and fallen 11 percent since the start 2023. “We believe that after this correction and with the stock trading at eight times FY24 EPS, 1.4 times FY24 BVPS and four times FY24 PPOP with improving and normalising ROA/ROEs in FY24, valuation now looks attractive,” Goldman said in its report.

Goldman Sachs is optimistic about Bandhan Bank’s future prospects, expecting the bank to emerge from its earnings cut cycle soon. The brokerage firm predicts that the bank will experience an increase in return on assets (ROA) and return on equity (ROE) over the fiscal years 2024 and 2025.

Goldman Sachs sees several factors driving Bandhan Bank’s compelling valuation post-correction. First, the bank’s microfinance institution (MFI) portfolio has demonstrated an improvement in collection efficiency, reaching 98.5 percent in March 2024. Second, the bank’s provision coverage has increased to around 80% due to the recovery from selling the MFI portfolio twice and recoveries from the guarantee fund. These developments have raised confidence in the MFI-cycle bottoming out at Bandhan Bank.

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