>ANDHRA BANK (AMBIT CAPITAL)

Going Strong
■ PAT growth of 19.4% for 4QFY10 to Rs 2.4bn, 60% for FY10 to Rs 10.5 bn
■ Building in 26% loan book growth during FY11E; SMEs and retail to lead
■ Margins at 3.44% for Q4 and 3.2% for FY10; likely to dip by 10-15bps
■ Gross NPA at 0.6% and net NPA at 0.17%
■ Maintain BUY with a marginally revised TP of Rs150

Andhra Bank reported a good set of numbers on the operational front for 4QFY10 with NII at Rs6.56bn, far ahead of our expectations and net profit at Rs2.4bn, a little ahead of our expectations. Although the gross and net NPAs moved up marginally during the quarter in absolute terms (in line with our expectations), the ratios have remained stable while provisioning coverage continues to be healthy (above 80%). Valuation and recommendation: We maintain our BUY recommendation on the stock with a marginally revised TP of Rs150. Our FY11E estimates have undergone a marginal upward revision as a result of which our FY11E ABVPS estimate has inched up to Rs110 (up 4% from our earlier estimate of Rs105). At its CMP of Rs133, the stock quotes at 1.3x our FY11E ABVPS of Rs110.

Combined with a ~5% dividend yield, we continue to back Andhra Bank as one of the safest and consistent-performing investments within the mid-cap banking universe.

To read the full report: ANDHRA BANK