Mehabe score: 2 G Factor: 5 Piotski Score: 4 The stock has a rating SELL. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 5 and Piotski score of 4.
Description
The Federal Bank Limited (‘the Bank’) was incorporated in 1931 as Travancore Federal Bank Limited. It provides retail and corporate banking, para banking activities such as debit card, third party product distribution etc., treasury and foreign exchange business.#
Main Points
Ratios
Capital Adequacy Ratio – 14.31%
Net Interest Margin – 3.22%
Gross NPA – 2.71%
Net NPA – 0.60%
CASA Ratio – 23%Site:FEDERALBNKMain Symbol:FEDERALBNK
Stock trades at 84.2, below its 50dma 85.15. However it is trading above its 200dma 76.87. The stock remains weak in the short term due to near term bearish momentum. However overall bullish structure remains intact. Price action will further build up as it moves above its dma50, currently situated at 85.15.
The 52 week high is at 92.50 and the 52week low is at 45.35
Price Chart
P/E Chart
Sales and Margin
Strengths
– Stock is trading at 1.02 times its book value
– has delivered good profit growth of 27.86% CAGR over last 5 years
Weakness
– has low interest coverage ratio.
– has a low return on equity of 10.64% for last 3 years.
-Contingent liabilities of Rs.40404.23 Cr.
– might be capitalizing the interest cost
Competition
– The industry trades at a mean P/E of 20.1x. Kotak Mah. Bank trades at the industry’s max P/E of 33.88x. FEDERALBNK trades at a P/E of 10.1x
– Industry’s mean G-Factor is 4.0 while the mean Piotski score is 6.0. FEDERALBNK has a G-Factor of 5 and Piotski scoreof 4.
– Average 1 month return for industry is -1.4%. The max 1- month return was given by ICICI Bank: a return of 5.0 %
Quarterly Results
Sales for period ended Jun 2021 is Rs 3525.0 cr compared to Rs 3572.0 cr for period ended Jun 2020, a fall of 1.3%
Operating Profits reported at Rs 1661.0 cr for period ended Jun 2021 vis-vis 1305.0 for period ended Jun 2020 .
Operating Margins expanded 1058.6 bps for period ended Jun 2021 vis-vis Jun 2020 .
The EPS for Jun 2021 was Rs 1.79 compared to Rs 2.61 for previous quarter ended Mar 2021 and Rs 2.05 for Jun 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 14267.0 cr for period ended TTM vis-vis sales of Rs 14314.0 cr for the period ended Mar 2021, a fall of 0.3%. The 3 year sales cagr stood at 7.0%.
Operating margins shrank to 45.0% for period ended TTM vis-vis 366.0% for period ended Mar 2021, contraction of 32100.0 bps.
Net Profit reported at Rs 1612.0 cr for period ended TTM vis-vis sales of Rs 1664.0 cr for the period ended Mar 2021, falling 3.2%.
Company recorded a Net Profit CAGR of 7.0% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 11178.0 cr for period ended Mar 2021 vis-vis Rs 3731.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 11.0% compared to 11.0% over the last 3 Years. – The stock has given a return of 48% on a 1 Year basis vis-vis a return of -1% over the last 3 Years. – The compounded sales growth on a TTM bassis is 5% vis-vis a compounded sales growth of 13% over the last 3 Years. – The compounded profit growth on a TTM basis is 5% vis-vis a compounded profit growth of 21% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Jun 2021 fii holding stood at 24.05% vis-vis 24.51% for Mar 2021 – Public shareholding has remained largely constant. The Jun 2021 public holding stood at 32.06% vis-vis 32.2% for Mar 2021
Conclusion
– Stock is trading at 1.02 times its book value
– has delivered good profit growth of 27.86% CAGR over last 5 years – has low interest coverage ratio.
– has a low return on equity of 10.64% for last 3 years.
-Contingent liabilities of Rs.40404.23 Cr.
– might be capitalizing the interest cost
Fundamentally, the stock remains weak. The business fundamentals are on shaky ground. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock reflects the poor fundamentals. The stock remains below its 50 DMA 85.15 and is trading at 84.2. It has shown near term lack of bullish momentum. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
