Better Operating Performance Than Other PSBs, Buy BoB For Target Price Of Rs.120: Edelweiss

Edelweiss Research, a leading financial service provider and brokerage firm, published a report on Bank of Baroda (BoB) - the second biggest PSB Bank - suggests 'buy' for a target price oestimated Rs 120 per share target price. BoB's market cap is worth Rs 541bn.

Stock Overview

Bank of Baroda's share price on the weekend, Friday closed at Rs 105.10 per share. The previous week, the stock performed well and maintains good gains of 2.75%. It has performed good over the 1 year, with 24.01% positive returns. The stock has touched the 52-week low of Rs 72.50 per share on 23 August 2021, and a 52-week high of Rs 104.85 per share on 11 April 2022.

CMP	Target Price	Potential Gains
Rs 105.1	Rs 120	15.00%

Fundamental Research key Highlights

• In Q4FY22 BoB posted better operating performance than other state-run banks. Core PPOP grew 1 % YoY / 12 % QOQ.
• In Q4FY22 loans grew 9 % YoY / 6 % QOQ driven by strong QoQ growth in retail ( 9 % QOQ ) and SME ( 4.5 % QOQ ).
• Overhang of Future Retail is done with which is reflected in increase in net credit cost to 2.5 % from 2.3 % QOQ was mainly on account of provisioning for Future Retail ( now 100 % provided for ). Going forward credit cost is likely to come down.
• Asset quality continues to improve sequentially. GNPLs stood at 6.6 % as opposed to 7.3 % in Q3FY22. Given lumpy stress already in its numbers and a benign corporate cycle, we expect asset quality to improve further.
• Major share of loan book growth is expected from Retail, Home Loans and MSME. Recoveries from NCLT resolutions are trickling in slowly.
• For BoB 86 accounts worth Rs 116bn have been approved but the expected recovery in Q1FY23 is at Rs 5bn.
• Management has guided for 10-12 % loan growth, around 10 bps improvement in NIM and credit cost at 1.5 % for FY23E.
• It is trading at an inexpensive valuation of around 0.5x P / BV on FY24e while its business outlook stands improved.

Valuation and Key risks

Edelweiss Research in its report has estimated a target price of Rs 120 per share. The brokerage has also mentioned the key risks which include 1) Sharper - than - expected slippage in asset quality. 2) International books can throw lumpy slippages.

About- Bank Of Baroda

Established in 1908 by Maharaja Sayajirao Gaekwad of Baroda, the Bank of Baroda (BoB) was one of the 14 banks that were nationalised in 1969. The bank has merged with Dena and Vijaya Bank and is now the second-largest PSU bank in the country with a loan book size of Rs 7tn. It has been one of the early players to have identified the potential and importance of international presence and is currently operating through its eight banking subsidiaries apart from the parent. Since FY06, BoB has charted a new growth strategy under the project " Parivartan ", rebranding itself, and energising its century-old brand.

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Research. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.