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FairWealth Equity Research 

24 February 2011

CMP: Rs 144;      SL: Rs 124;     Target: Rs 195;      Upside: 35.42%;     Horizon: 1 YR 

Andhra Bank, established in 1923 was nationalized in April 1980. It is a mid size state-
Bloomberg Code ANDB IN owned bank with dominance presence in South India It serves customers via a spread of
1557 branches and 859 ATMs across India with total business of Rs. 147682cr by end of
Market Cap (Rs bn/USD bn) 69.71/1.53
Dec 31, 2010. Bank’s loan portfolio includes Corporates (52.5%), MSMEs (15%), Retail
Face Value (Rs) 10
(15.3%), Agriculture (15.3%) and others (1.9%). Bank also provides the credit substitutes
Book Value (Rs) 90.93 such as letter of credit and guarantees. In addition, bank provides fee based products and
EPS (Rs) 24.63 services such as cash management services, insurance services with the JV of Bank of
Dividend Yield 4.63% Baroda and L&G Inc. bancassurance services etc.
52 week H/L (Rs) 190.15/94.65
Daily Avg. Vol (mn) 0.12 INVESTMENT THESIS
Listed At NSE/BSE
Equity capital (Rs cr) 485 • NII up 44% driven by improving margins & strong credit growth, net interest margin
(NIM) improved to 3.9% in Q3FY11 v/s 3.35% during the corresponding period last
(Rs cr) Q3FY11 Q3FY10 % Chg 9MFY11

NII 839.93 582.53 44.08 2359.44 • Andhra Bank is well capitalized with 12% capital adequacy ratio (CAR) under
EBITDA 626.61 527.20 18.16 1701.56
Basel-II. Including 9MFY11 profit, CAR comes at 13.4%. In addition to this, capital
infusion from the GoI through right issue is expected by March 2011 which will
PAT 330.91 240.26 20.36 954.27
further boost its capital base.
NIM % 3.91 3.44 0.47 bps 3.91

NNPA % 0.47 0.17 0.30 bps 0.47 • Asset quality of the bank deteriorated during the quarter as gross NPA increased to
EPS (Rs) 6.82 4.95 37.77 19.62
1.41% in Q3FY11 against 0.87% in the corresponding quarter last year. Net NPA
Cost of
also rose to 0.47% as on Dec 31, 2011 from 0.17% y-o-y. Provision coverage ratio of
5.84 5.85 -0.01bps 5.84
Deposit (%) the bank stood at 80.42% higher than the regulatory requirement of 70%,
Yield on
advances (%)
11.07 10.86 0.21bps 11.07 Provisioning of the bank increased because of the higher slippage rate of 0.3%.
Bank will have to increase the provision in next couple of quarter.

Price Performance % Valuations: We expect strong growth in profitability given the healthy margins and
1M 3M 6M 12M robust business growth. While slippage rate at 0.3% is lower leading to higher NPA
provisions, PCR over 80% provides comfort. Weak asset quality also remains concern.
Absolute 18.5 (16.8) (5) 47.5
We expect Andhra Bank to report book value of Rs.110 and Rs. 134 in FY11 and FY12
Rel to Nifty (1.9) (7.5) 2.4 12.9 respectively. Stock trades at just 1.4x and 1.1x multiple of our estimated FY11E &
FY12E adjusted book value. At the CMP, stock offers dividend yield of 4.4% and
5.3% for FY11E and FY12E respectively. Hence, we recommend BUY on Andhra
Sharmila Joshi Bank.
+91 09320159211 TECHNICAL VIEW: Buy around Rs. 133-138 with a strict SL of below Rs. 124
Prakash Chandra Pandey It seems that the Andhra Bank has completed the 4th wave of the Larger Pattern unless it
closes below 124. It can go up to Rs. 195 in next 12 months. We advise our clients to enter
+91 9313337742
between Rs. 133-138 with the stop loss of below Rs. 124.

Fairwealth Research Desk 
Techno Funda Call- Andhra Bank Ltd

Stock Ratings
BUY   The stock's total return is expected to exceed 15% over the next 12 months
ACCUMULATE The stock's total return is expected to be within 10-15% over the next 12 months
REDUCE   The stock's total return is expected to be within 0-10% over the next 12 months
SELL The stock's total return is expected to give negative returns over the next 12 months
NOT RATED   The Analyst has no recommendation on the stock under review

Research Team 
Name  Designation  Email ID
Sharmila Joshi  Head‐Equity Research
Fundamental Research Team 
Prakash Pandey  AVP‐PMS
Preeti Gupta  Sr. Research Analyst
Varun Khanna  Research Analyst
Suvarna Binjola  Research Analyst
Tanisha Jolly  Research Analyst
Shakti Rajpal  Research Analyst
Akansha Jain  Research Analyst
Ankit Manuja  Research Analyst
Jitender  Research Associate
Ankit Sethi  Research Associate
Nidhi Pahwa  Research Associate
Technical Research Team 
K.K. Madaan  Head‐Technical
Hunny Tarika  Sr. Technical Analyst
Pervez Danish  Sr. Technical Analyst

2  24 February 2011
wealth Rese
earch Deskk 
no Funda Call-
C Andhra Bank Lttd

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s prepared for
f the informatiion purpose and does not constittute a solicitationn to any person to t buy or sell a security.
s While tthe
informationn contained
  therrein has been obttained from sourrces believed relliable investors are advised to sa
atisfy themselve
es before makingg any investmennts.
Fairwealth Securities Ltd does
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3  24 February 2011