Here is an excerpt from Bernstein Equity Research.
ICICI Bank has been a laggard in the current market (~20% under performance to HDFCB), driven by negative surprises in the overseas book. However, it has been on a strong improvement trajectory under the current CEO (~24% annualized CAGR in operating profits last 6 quarters). Its plan to raise capital (Core Tier 1 capital would go from 13.4% to 15.5%) should backstop concerns on its back book and provide it with growth capital. We find the valuation at 1.9x FY20 BV (1.6x FY21E BV, post raise) compelling. We believe the upcoming capital raise may be a good time to participate in the stock.
Going forward, as ICICI's improvement is perceived, we expect the gap to narrow. We value ICICI Bank at 1.9x FY21E P/BV, with target price of INR 430.
