It is generally said that a ‘Fundamentally Strong’ stock is one that equips itself by conducting operations when the respective industry goes through financial distress. Moreover, such companies enjoy the luxury of operating their business on comparatively lower debt levels, good amounts of retained earnings, and stable margins.
Listed below is one such Fundamentally Strong stock with strong financials and margin ratios:
Federal Bank Limited
Federal Bank Limited is a commercial banking company based in India that operates through a network of branches and ATMs across the country. The Bank’s business segments consist of wholesale/corporate banking, retail banking, and the treasury segment. It generates a majority of revenues from the domestic markets.
Shares of the Bank, today, opened at a price of Rs 128.90, which is around 0.27 percent up as compared to the previous closing price of Rs 128.55. The Bank has a market capitalization of Rs 27,206 crores.
Last week, through a regulatory filing with the BSE, the Bank announced results for the last quarter as well as annual results pertaining to FY22-23 which are discussed later on in the writeup. Moreover, the Board recommended a final dividend of Rs 1 per share (50 percent of its face value of Rs 2) for the financial year 2022-23.
Having a look at the quarterly numbers reported, the operating profits have marginally increased from Rs 1,348 crores in Q3 v/s Rs 1,394 crores in Q4. Moreover, the net profits of the Bank improved from Rs 852 crores to Rs 940 crores during the same time horizon.
YoY comparison of the above-mentioned aspects leads us to observe that the company has been successful in maintaining healthy growth with operating profits increasing from Rs 3,951 crores during FY21-22 to Rs 5,62 crores in FY22-23 and net profits growing from Rs 1,965 crores to Rs 3,176 crores during the same period.
Looking at some basic Bank-specific parameters, the gross as well as net NPA ratios have gone down with the former reducing from 2.78 percent in FY21-22 to 2.35 percent in FY22-23 and the latter moving from 0.98 percent to 0.73 percent keeping the timeframe the same.
With a positive outlook for the Bank, IDBI Capital has given a ‘Buy’ tag to the stock with a target price of Rs 175 indicating an upside of 36 percent as compared to the current price levels.
Written by Amit Madnani
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
