South Indian Bank is looking good to buy for medium to long term perspective

Aggressive Old Private Sector bank for your portfolio! South Indian Bank (SIB) was incorporated in 1928 during the Swadeshi movement. The establishment of the bank was the fulfillment of the dreams of a group of enterprising men who joined together at Thrissur, a major town (now known as the Cultural Capital of Kerala), in the erstwhile State of Cochin to provide for the people a safe, efficient and service oriented repository of savings of the community on one hand and to free the business community from the clutches of greedy money lenders on the other by providing need based credit at reasonable rates of interest. SIB is engaged in personal banking, NRI banking, business banking, and general banking services in India. Translating the vision of the founding fathers as its corporate mission, the bank has during its long sojourn been able to project itself as a vibrant, fast growing, service oriented and trend setting financial intermediary. SIB has grown at 25% CAGR in the last five years in terms of business and PAT. SIB reported a strong Q3FY13 largely driven by better?than? expected rebound in margins. Net profit of SIB rose 25.44% to Rs 128.25 crore in the quarter ended December 2012 as against Rs 102.24 crore during the previous quarter ended December 2011. Total Operating Income rose 19.51% to Rs 1127.75 crore in the quarter ended December 2012 as against Rs 943.61 crore during the previous quarter ended December 2011. Steady improvement in asset quality with Gross NPA at 1.6% down QoQ due to Rs0.4bn restructuring adjusted for which asset quality performance was satisfactory and NNPA stood at 0.7%. NIM improving from 3.05% last year same quarter to 3.24% in Q3FY13. Overall, Q3FY13 was a stable quarter. Outlook and valuation: Currently, the stock is trading at moderate valuations of 1.2x FY2014 BV. In light of capital-raising and strong expansion plans, I value the bank at 1.5x FY2014 BV with a target price of Rs 35 per share Investment Rationale Bank s profit grew ~ 3 times in last five years which is almost equal to the growth rate of industry leaders in private sector like HDFC and ICICI. Stock has been on the uptrend and has gone up more than 20% since last year, but HDFC, ICICI and Axis Banks have grown more than 45% during the same period. It has got scope to move up further post 29th Jan RBI monetary policy Now that the stock has consolidated b/w 27-28 for some time, it started moving up. I expect this movement to continue till it reaches 35. Conclusion: Both from the fundamental and technical perspective this stock looks attractive and investors and traders should look at buying this stock on dips.