Buy This Large Cap PSU Bank Stock, Likely To Give High Returns, Says Kotak Securities

Kotak Securities has a 'Buy' on Punjab National Bank (PNB) with an unchanged target price of Rs. 60 apiece. The stock with the given target price is likely to give a decent return of 16%. PNB is a large cap Public sector bank. It has a market valuation of Rs. 56,541.56 crore.

Rationale - According to the Kotak Securities:

• Asset quality position is poorer than peers, but transformation efforts underway.
• Operating metrics unlikely to see meaningful deterioration.
• Current benign environment should help bank report steady improvement on return ratios.
• Valuations continue to be inexpensive. Maintain BUY (FV unchanged at Rs60).
• Valuing the bank at 0.7X Book Value/Share (adjusted) & 6X March24E Earnings Per Share.

Here are the Positive & Negative of Banks according to Kotak Securities:

Positives

• Outlook for recoveries in FY24 (from both NPA & written-off accounts) is healthy.
• Steady decline in slippages & credit costs closer to peers can result in a re-rating of valuation multiples.
• Punjab National Bank is trading at a discount to PSU bank peers.
• When bond yields stabilize, retirement-related provisions can see some decline.

Negatives

• Banking system likely to see pressure on Net Interest Margin in next few quarters.
• Operating costs are elevated because of wage revision & volatility in bond yields.

Stock Outlook

On Friday, the stock of PNB last traded at Rs. 51.35 apiece on NSE. It delcined 1.15% as comapred to the previosu close of Rs. 51.95 apiece. Its 52 week high is Rs. 62 apiece and 52 week low is Rs. 28.05 apiece.

The stock soars 65.11% in 1 year and 61.48% in 3 years, respectively. Whereas, it declined 43.23% in 5 years.

Disclaimer - The stock has been picked from the brokerage report of Kotak Securities. 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 consult with certified experts before making any investment decision.