Indian Bank and Cyient: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Indian Bank and Cyient. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between November 18, 2024 and November 22, 2024.

Indian Bank

Indian Bank share price was at ₹537 (as on November 14, 2024) and its target price is set at ₹622 with an upside potential of 16%.

Indian Bank: Investment Rationale

• • Indian Bank has 5,856 domestic branches (including 3 DBUs), out of which 1,983 are Rural, 1,532 are Semi-Urban, 1,174 are Urban & 1,167 are in the Metro category. The Bank has 3 overseas branches and 1 IBU (Gift City Branch). It has 5,217 ATMs & BNAs and 12,993 numbers of Business Correspondents.

• In Q2 FY2025, it reported healthy business growth at 10% YoY to ₹12,43,759 crores, driven by a 12% surge in advances to ₹5,50,644 crores. Deposits rose 8% to ₹6,93,115 crores. The CASA deposits of the bank increased 5% YoY to ₹2,69,359 crores with a CASA ratio of 38.9%.
• The bank has exhibited substantial improvement in asset quality in Q2 FY2025. GNPA (%) improved to 3.48% as compared to 3.77% in the previous quarter and 4.97% same period last year. NNPA (%) improved to 0.27% as compared to 0.39% in the previous quarter and 0.60% same period last year. The fresh slippages of loans dipped to ₹1,384 crores in Q2 FY2025 compared with ₹1,956 crores in the previous quarter and ₹1,982 crores in the corresponding quarter last year.
• The bank has posted an 8% growth in net interest income (NII), while the core fee income of the bank also improved 11% in Q2 FY2025. The Net Interest Margin (NIM) of the bank was stable at 3.44% in Q2 FY2025 compared to 3.46% in the corresponding quarter of the previous year.

• The provision coverage ratio has increased to 97.60% at the end September 2024 compared to 96.66% a quarter ago and 95.64% a year ago. Capital Adequacy Ratio improved by 102 bps to 16.55%. CET-I improved by 144 bps YoY to 13.51%, and Tier I Capital improved by 138 bps YoY to 14.01% in Sep’24.
• Return on Equity (RoE) increased by 128 bps to 21.04% in Sep’24 from 19.76% in Jun’24.
• On the digital banking front, a total of 102 Digital Journeys, Utilities, and Processes have been launched so far. The number of Mobile Banking users has grown by 20% year over year, reaching 1.81 crores UPI users and Net Banking Users have seen a 27% & 13% YoY increase respectively, reaching 1.95 crores and 1.11 crores, respectively.
• INDSMAfT- new omni-channel banking application having a wide range of features launched for customers. The app has several features viz., integrated bill payment, pay to contact, e-shopping / m-shopping, cross-platform accessibility, goal planner, etc. providing a seamless and enriched experience for its valued customers.

Indian Bank: Shareholding Pattern

Promoter shareholding is highest in the Indian Bank at 73.84%.

India n Bank: Valuation

The bank has launched an array of digital products to facilitate customers for a seamless and convenient banking experience. Healthy business growth along with improved asset quality and adequate liquidity auger well for the bank. Thus, it is expected that the stock will see a price target of ₹622 in an 8 to 10-month time frame on a two-year average P/BV of 1.16x and FY26 (E) BVPS of ₹536.41.

Indian Bank: Risk

• Economic slowdown
• Deterioration in asset quality

Cyient Limited

Cyient share price was at ₹1,805 (as on November 14, 2024) and its target price is set at ₹2,058 with an upside potential of 14%.

Cyient Limited: Investment Rationale

• Cyient has been recognized among the global Top 10 pure-play engineering services providers in Everest Group’s Engineering Services Top 50 ranking. The company maintains leadership across key sectors, including ER&D, digital engineering, aerospace, semiconductors, telecommunications, medical devices, industrial, and Industry 4.0. in Zinnov Zones rankings. Cyient has also been recognized as a Product Challenger in Gen AI globally by ISG.
• On the development front, the company is making strong and continued progress towards unlocking the potential of its semiconductor business and setting up a wholly owned subsidiary, CSPL or Cyient Semiconductors Private Limited to drive dedicated focus on turnkey ASIC design and chip sales through a fabless model. Towards this initiative, it has reached an agreement to acquire a 27.3% stake in Azimuth AI, a fabless custom ASIC company known for its expertise in energy and industrial applications with a focus across global markets, including the Indian market.
• During Q2 FY25, net profit rose 24% QoQ to ₹179 crores, while revenue climbed 10% QoQ to ₹1,849 crores. The Digital, Engineering & Technology (DET) segment’s EBIT margin expanded by 75 basis points QoQ, reaching 14.20%. Growth in the DET segment is expected to be fuelled by aerospace expansion led by Airbus, a recovery in sustainability initiatives, stronger traction with top 10 clients, and a ramp-up in connectivity deals.

• Further, it is focusing on transformation in the energy sector. In line with that and to expand its global footprint, it has set up a dedicated entity in the United Arab Emirates to cater to the Middle East region. To accelerate this initiative, it has reached an agreement to acquire Abu Dhabi & Gulf Computer Establishment, (ADGCE), an Abu Dhabi-based technology consulting and digital services provider primarily catering to the energy sector. It would help the company to access one of the largest markets for the energy business.
• The management of the company expects Q3 to be stronger than Q2, with a positive outlook for H2 FY25 and retained guidance for flattish revenue growth for the year and an EBIT margin target of 16% by Q4.

Cyient Limited: Shareholding Pattern

In the overall shareholding of Cyient Limited, foreign investors have the highest shareholding of 33.17%.

Cyient Limited: Valuation

The management of the company has focused on investing in scalable and high-growth areas would accelerate the overall growth profile of the company. Its pipeline for the year remains strong and new growth segments and sustainability delivered growth on a YoY basis. Moreover, its margin improvement program continues to gain traction and it would translate into improved revenue realization and drive a sharp recovery of growth through the coming quarters. Thus, it is expected that the stock will see a price target of ₹2,058 in 8 to 10 months’ time frame on three-year average P/Ex of 24.91x and FY26 EPS of ₹82.63.

Cyient Limited: Risk

• Economic Slowdown
• Technology Disruption

Conclusion

These two stocks, one from the banking sector and the other from the tech sector can reach their target price in the coming 8 to 10 months. But it is always better if you do your analysis before investing and set a stop loss target. To keep track of your invested stocks, open demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.