ICICI Bank share price: Morgan Stanley revises target price to Rs 710

ICICI Bank has emerged stronger out of the COVID crisis, the bank has strengthened capital, built excess provisions and improved liquidity positions. Moreover, the bank has been a big beneficiary of increased digital adoption. A combination of these factors should help the bank rapidly gain market share and materially lower its cost-to-income ratios over the next few years. Over the next two years, ICICI's credit costs should normalize and PPoP margins improve to all-time highs, ensuring 16% RoE by F23e despite low leverage (9x).

Morgan Stanley recently revised price target of Rs 710 implies 9.5x Mar-23e core PPoP (well below that of other large retail lenders): Reuters

Morgan Stanley believes that the ICICI Bank share price will rise relative to the country index over the next 60 days. ICICI Bank has emerged stronger out of the COVID crisis, the bank has strengthened capital, built excess provisions and improved liquidity positions. Moreover, the bank has been a big beneficiary of increased digital adoption. A combination of these factors should help the bank rapidly gain market share and materially lower its cost-to-income ratios over the next few years. Over the next two years, ICICI's credit costs should normalize and PPoP margins improve to all-time highs, ensuring 16% RoE by F23e despite low leverage (9x). Morgan Stanley recently revised price target of Rs 710 implies 9.5x Mar-23e core PPoP (well below that of other large retail lenders).

Risks to Upside:

Strong pickup in loan growth and margin

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Greater improvement in operating leverage given digitization
Continued improvement in asset quality

Risks to Downside:

Sharp rise in Covid-19 cases/delayed availability of vaccines leading to slower than expected macro pickup - driving slower growth and higher NPLs
Potential risk of higher holding company discount if the RBI makes move to NOFHC mandatory

Ajit Mishra, VP - Research, Religare Broking says that the Markets traded upbeat and extended gains, largely driven by positive global cues. High optimism over the US stimulus package and positive commentary by the Fed led to a good start which further strengthened as the day progressed. The Nifty Index ended with healthy gains of 0.4% at 13,740 levels. A mixed trend was witnessed on the sectoral front wherein Capital Goods, Banking and Consumer Durables ended with gains whereas Metal, Oil & Gas and Auto were the top losers. The broader markets underperformed wherein both Midcap and Smallcap ended with losses of 0.1-0.2%.

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Markets are inching higher with every passing day but lack momentum which shows a positive yet cautious approach among the participants. Since we’re closely following global cues, any correction in the global markets may induce profit taking here too. We thus suggest limiting naked leveraged trades and adding positions only on dips.

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