Nomura Initiates Coverage On This Rekha Jhunjhunwala-Backed Midcap Stock Seeing 25% Upside

Federal Bank’s shares are climbing today, following Nomura’s initiation of coverage with a ‘buy’ rating and a target price of 190, signalling a potential 25% upside from the current level.

What does the analyst say? Nomura highlights the bank’s strategic shift towards unsecured loans and increased focus on trust and fees as key growth drivers. They project a 19% loan growth from FY24 to FY26, along with a 22% rise in pre-provision operating profit (PPOP) and a 17% compound annual growth rate (CAGR) in profit after tax (PAT) over the same period.

According to Nomura, Federal Bank’s current valuations are attractive, making it a top pick in the mid-cap banking sector. This endorsement has boosted Federal Bank’s performance in the market today.

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Nomura believes that Federal Bank’s stock will face a critical period of observation in the near term due to the upcoming departure of managing director & CEO Shyam Srinivasan in September 2024. Srinivasan has led the bank since 2010. Nomura also expresses confidence in the bank’s second-level management to handle the transition effectively.

The brokerage values Federal Bank at 1.2 times its December-2025 Price-to-Book-Value, attributing a contribution of ₹8 per share from its subsidiaries.

Price Action: Federal Bank shares were trading 3.46% higher at ₹153.90 on Monday afternoon, roughly an hour before market close. 

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Posted In: EquitiesPrice TargetInitiationMarketsAnalyst RatingsMoversTrading IdeasFederal BankNomuraRekha Jhunjhunwala