1:5, First Ever Split: Once Rs 566 PSU Bank Stock Has Split Into 5 Shares; 9 Analysts Recommend 'Strong Buy'

Public sector lender, Canara Bank which once traded over Rs 566 apiece, has split in the ratio of 1:5 on Wednesday. The stock is now affordable by trading below Rs 120. On the ex-split day, Canara Bank's stock witnessed huge buying sentiment, rising by nearly 5%. The highest target price on Canara Bank is Rs 650.

Canara Bank Share Price:

At the time of writing, the stock traded at Rs 118.50 apiece, up by 4.64% on BSE with a market cap of Rs 1,07,441.86 crore. Adjusted to the stock split ratio, the stock's 52-week high and low are now at Rs 126.53 apiece and Rs 58.26 apiece respectively.

The stock's new 10% upper and lower circuits are at Rs 124.55 and Rs 101.95 apiece respectively.

Before the stock split, Canara Bank shares stood at Rs 566.25 apiece, up by 3.11% on May 14, with a market cap of Rs 1,02,725.13 crore.

Canara Bank Stock Split:

The PSU bank is splitting for the first ever and in the ratio of 1:5. Simply put, 1 existing equity share of Canara Bank has been subdivided into 5 smaller shares. Notably, the share capital reserves will remain the same. The face value of Rs 10 will be split into Rs 2 each.

Only those investors will be eligible for stock split benefits who hold Canara Bank shares by the end of the record date, May 15, 2024.

BUY Canara Bank Share Price:

As per Emkay Global, Canara Bank continued to report relatively moderate credit growth at 12% YoY/1% QoQ, whereas deposits grew relatively faster at 11%YoY/4% QoQ leading to moderation in LDR to 71%. Nevertheless, higher yields on account of the increased share of retail loans coupled with a 66bps QoQ improvement in CASA ratio to 30% (and hence the contained cost) led to a 3bps QoQ uptick in NIMs to 3.1%.

Ahead, the bank expects credit growth to remain moderate at @10% (with a slight upward bias) and margins at 2.9-3%, on the back of better cost management and portfolio mix, incl. the high-yielding RAM segment, said Emkay's note.

On the valuation, Emkay said, "Factoring in the healthy growth in fees and lower opex, we revise FY25-26E earnings by 6-7% and expect the bank to deliver a healthy 1-1.1% RoA/17-21% RoE over FY25-27E. Given our general positive stance for PSBs and in particular CBK's sustained strong performance, we retain BUY, lifting our TP to Rs650/sh (from Rs550), rolling forward the standalone bank at 1.1x FY26E ABV and subs at Rs30/sh."

Also, the recommendation from 15 analysts for Canara Bank is HOLD, as per Trendlyne data. Of the total, 15 analysts have suggested 'Strong BUY', while 2 have suggested HOLD. From the remaining, 1 has advised 'Sell' and 4 others have recommended 'Strong Sell'.

Also, in its latest note, Kotak Institutional Equities said, "Going into FY2025E, we expect the pressure on NIM to sustain and recoveries from written-off accounts are likely to decline. While the bank might be able to offset most of the RoA drag through a further decline in credit cost, the trend on provision reversals will be a key monitorable. We believe that further improvement in RoA seems difficult, implying that we are closer to peak return ratios. At the same time, the valuation discount of Canara Bank with best-in-class peers has declined sharply over the past couple of years, making further re-rating difficult from here."

Thus, Kotak added, "We maintain REDUCE rating with FV of Rs530 (no change). We value the bank at
1.0X March 2026E adjusted book with RoEs of 15-16% in the medium term. Return ratios for Canara Bank have improved recently driven by declining credit costs and strong recoveries from written-off accounts."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns. in advises users to consult with certified experts before making any investment decision.