FEDERALBNK - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 4.1
| Stock Code | FEDERALBNK | Market Cap | 70,746 Cr. | Current Price | 287 ₹ | High / Low | 298 ₹ |
| Stock P/E | 18.2 | Book Value | 142 ₹ | Dividend Yield | 0.42 % | ROCE | 6.95 % |
| ROE | 13.0 % | Face Value | 2.00 ₹ | DMA 50 | 265 ₹ | DMA 200 | 230 ₹ |
| Chg in FII Hold | -0.60 % | Chg in DII Hold | 1.39 % | PAT Qtr | 1,041 Cr. | PAT Prev Qtr | 955 Cr. |
| RSI | 64.2 | MACD | 7.10 | Volume | 68,13,134 | Avg Vol 1Wk | 80,72,932 |
| Low price | 173 ₹ | High price | 298 ₹ | PEG Ratio | 0.63 | Debt to equity | 8.75 |
| 52w Index | 91.2 % | Qtr Profit Var | 8.98 % | EPS | 15.8 ₹ | Industry PE | 15.8 |
📊 Analysis: FEDERALBNK shows strong fundamentals for long-term investment. ROE (13.0%) is healthy, reflecting profitability, though ROCE (6.95%) is modest due to the nature of banking operations. EPS of 15.8 ₹ is solid, and the P/E ratio (18.2) is slightly above the industry average (15.8), suggesting fair valuation with a mild premium. Dividend yield of 0.42% provides minor shareholder returns. PEG ratio of 0.63 indicates growth is reasonably priced. Debt-to-equity at 8.75 is typical for banks, not alarming. Technically, the stock is trading above DMA 50 (265 ₹) and DMA 200 (230 ₹), with RSI at 64.2 (near overbought) and MACD positive, suggesting bullish momentum.
💰 Ideal Entry Zone: 260 ₹ – 275 ₹ (near DMA 50 support, offering margin of safety below current price).
📈 Exit / Holding Strategy: For long-term investors, holding is recommended given strong ROE, fair valuation, and growth visibility. If already holding, maintain positions with a 3–5 year horizon. Exit strategy: consider partial profit booking near 295–298 ₹ (52-week high zone) if valuations stretch, but retain core holdings for compounding growth in the banking sector.
Positive
- Healthy ROE (13.0%) indicates profitability.
- EPS of 15.8 ₹ reflects consistent earnings.
- PEG ratio of 0.63 highlights reasonably priced growth.
- DII holdings increased (+1.39%), showing strong domestic institutional support.
Limitation
- ROCE (6.95%) is modest compared to non-financial sectors.
- Dividend yield of 0.42% offers limited shareholder returns.
- RSI at 64.2 indicates near overbought levels.
Company Negative News
- Decline in FII holdings (-0.60%), showing reduced foreign investor confidence.
- High debt-to-equity (8.75), though typical for banks, may concern conservative investors.
Company Positive News
- Quarterly PAT growth (1,041 Cr. vs 955 Cr.), showing earnings improvement.
- Quarterly profit variation +8.98%, reflecting steady growth.
Industry
- Industry PE at 15.8, slightly lower than company’s valuation, suggesting FEDERALBNK trades at a mild premium.
- Banking sector benefits from credit growth, digital adoption, and rising retail loan demand.
Conclusion
✅ FEDERALBNK is a good candidate for long-term investment, supported by strong ROE, fair valuation, and steady earnings growth. Ideal entry zone is 260–275 ₹ for margin of safety. Investors should hold for 3–5 years to benefit from compounding growth, with partial exits near 295–298 ₹ if valuations peak.
Selva, would you like me to extend this into a peer benchmarking overlay with other private banks (like ICICI Bank, Axis Bank, Kotak Mahindra) so you can compare relative strength and margin-of-safety positioning for your basket rotation strategy?