Motilal Oswal has upgraded the target price to ₹90 from earlier levels while maintaining a 'Neutral' rating on IDFC First Bank following the bank's strong Q1FY27 performance. The brokerage's latest analysis cites improving asset quality metrics and a stronger earnings outlook as key drivers for the upgrade. The target price is premised on 1.4x March 2028E Adjusted Book Value, reflecting the bank's enhanced operational performance and better risk management strategies.
IDFC First Bank delivered impressive first quarter FY27 results with Profit After Tax of ₹1,070 crore, representing a significant 132% year-on-year growth and 237% quarter-on-quarter increase. As reported by Motilal Oswal, this performance was significantly ahead of estimates and exceeded expectations by 34% compared to brokerage projections. The strong results were driven by healthy operating performance, better asset quality metrics, and one-off interest on IT refund and strong treasury gains, demonstrating the bank's operational efficiency and strategic positioning.
The bank received ₹5.1 billion in claims under the Consumer Grievance and Financial Mediation Unit (CGFMU) scheme against its Microfinance Institution (MFI) portfolio during the quarter. According to Motilal Oswal's report, the bank strategically utilized these claims to create a contingency provision of ₹5.2 billion, factoring in macro and geopolitical uncertainties. This proactive approach demonstrates the bank's prudent risk management practices and strategic positioning for future challenges.
Motilal Oswal has raised its FY27 and FY28E earnings estimates by 21% and 12% respectively, factoring in an improved asset quality outlook and the bank's enhanced operational performance. The brokerage estimates Return on Assets (RoA) of approximately 1.0% and Return on Equity (RoE) of 8.9% for FY27. This upward revision reflects the bank's stronger earnings outlook, better risk management strategies, and improved asset quality metrics that were key drivers of the Q1FY27 performance.
