FEDERALBNK - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.0

📊 Financials Overview:

• Revenue & Profit Growth: PAT rose from 862 Cr. to 955 Cr. (↑ 10.8%), though quarterly variation shows -9.6% decline.
• Margins: ROE at 13.0% is healthy; ROCE at 6.95% is moderate for banking sector.
• Debt Ratios: Debt-to-equity at 8.75 is typical for banks, reflecting leverage-driven business model.
• Cash Flows: Dividend yield at 0.45% provides modest shareholder returns.

💹 Valuation Indicators:

• P/E Ratio: 17.3 vs Industry PE of 14.7 → slightly overvalued but within reasonable range.
• P/B Ratio: Current Price / Book Value ≈ 1.87, fair compared to peers.
• PEG Ratio: 0.60 → attractive valuation relative to growth.
• Intrinsic Value: Fair value estimated near 240–250 ₹; current price (267 ₹) trades at premium.

🏦 Business Model & Competitive Advantage:

• Federal Bank operates in retail, corporate, and SME banking with strong presence in South India.
• Focus on digital banking and customer-centric services enhances competitiveness.
• Healthy asset quality and diversified loan book provide resilience.

📈 Entry Zone & Long-Term Guidance:

• Entry Zone: Attractive accumulation range between 240–250 ₹.
• Long-Term Holding: Strong fundamentals and growth prospects make it suitable for long-term investors; caution advised at current highs.

Positive

• ROE at 13% reflects efficient capital use.
• PEG ratio of 0.60 indicates attractive valuation relative to growth.
• DII holdings increased by 1.54%, showing domestic institutional confidence.
• Strong digital banking initiatives and diversified loan portfolio.

Limitation

• P/E slightly above industry average, indicating mild overvaluation.
• ROCE at 6.95% is moderate compared to top peers.
• FII holdings declined by -1.32%, showing reduced foreign investor confidence.
• RSI at 73.4 indicates overbought zone, risk of near-term correction.

Company Negative News

• No major negative news reported; valuation premium and high RSI remain key concerns.

Company Positive News

• Quarterly PAT growth of 10.8% highlights earnings strength.
• DII holdings increased, reflecting domestic investor confidence.

Industry

• Industry PE at 14.7, slightly lower than Federal Bank’s 17.3.
• Banking sector growth driven by credit expansion, digital adoption, and stable interest rate environment.

Conclusion

⚖️ Federal Bank shows strong fundamentals with healthy ROE, attractive PEG ratio, and consistent profit growth. However, valuations are slightly stretched and RSI indicates overbought conditions. Long-term investors may consider accumulation near 240–250 ₹ for margin of safety, while short-term traders should be cautious at current highs.