Motilal Oswal Initiates "Buy" On 5 PSU Banking Stocks, Sees Upside Up To 25%

Motilal Oswal in December 2022 Results Preview report on Financial Sector has picked 5 PSU banking stocks which includes the Bank of Baroda, State Bank Of India (SBI), Indian Bank, Union Bank, and Canara Bank. According to the brokerage, the stocks are likely to give a return up 25% in 2023 if considering the given target price. Here are the key highlights of the stock:

1. Bank of Baroda

Motilal Oswal has placed a buy on the stock of Bank of Baroda with a target price of Rs 200 apiece. With the given target price, it claims a potential upside of 10% if you buy the stock at the current market price. The current market price of the stock on NSE is Rs 182.30 apiece, trading 0.27% down.

With Rs 94,299.79 crore Market capitalisation, it is a large-cap PSB stock. It has given 5.79% positive return in 1 month and 35.95% in 3 months, respectively. In 1 year, it gave 114.25% multibagger return. It gave 80.37% positive return in 3 years and 12.42% in 5 years, respectively.

Brokerage's Views

• Expect earnings and business growth to see healthy traction
• Expect slippages to moderate and asset quality to improve further; Credit cost likely to remain stable
• Opex trajectory, particularly employee costs, is a key focus area due to wage revision cost
• Traction in deposits and margin trajectory to be key monitorables

2. Canara Bank

The brokerage assigns buy on the stock with a target price of Rs 380 apiece. It claims a potential upside of up to 17% from its current level. The stock is currently trading at Rs 324.60 apiece on NSE, trading 0.70% down from its previous close.

It is a midcap PSU Banking stock having a market capitalisation of Rs 58,986.45 crore. The stock in 3 months surged 43.05%. It gave 54.03% positive return in 1 year and 46.63% positive return in 3 years, respectively. However, in 5 years it fell by 10.92%.

Brokerage's Views

• Expect business growth to remain steady.
• Expect asset quality and slippages to moderate.
• Credit costs to stay elevated; Restructuring book a key monitorable.
• Expect margin to expand to ~2.9%; Traction in deposits and movement in cost of deposits to be key monitorable.

3. Indian Bank

Motilal Oswal Recommends "Buy" the stock of Indian Bank with a target price of Rs 300 apiece for 1% potential gains. The stock is currently trading at Rs 296.90 apiece on NSE, 0.49% up from its previous close.

It is midcap PSU Banking stock with a Rs 36,921.10 crore market capitalisation. The stock surged 6.97% in 1 week, 4.39% in 1 month, and 50.08% in 3 months, respectively. In 1 year it gave 105.89% positive return and 188.77% multibagger return in 3 years. In 5 years it gave 21.69% negative return.

Brokerage's Views

• Expect loan growth to remain modest
• Stress in SME and restructuring book to be monitored
• Expect margin to improve to ~3.3%; Traction in deposits and rise in cost of deposits to be key monitorable
• Expect asset quality to improve and credit costs to remain steady

4. State Bank of India (SBI)

Motilal Oswal Initiates a buy on the stock of SBI with a target price of Rs 725 apiece. The brokerage with the given target price, sees 20% potential upside from its current level. The stock's current market price on NSE is Rs 608.05 apiece, 0.47% up from the previous close.

SBI is India's largest Bank with a market capitalisation of Rs 5,41,277 crore. It is a large-cap PSU Bank. The stock has given 14.13% positive return in 3 months, and 23.47% in 1 year, respectively. It has given 82.18% positive return in 3 years and a maximum 98.45% positive return in 5 years, respectively.

Brokerage's Views

• Expect credit costs to remain modest
• Expect loan growth to see a healthy traction
• Expect asset quality to continue to see improvement
• Expect margin to improve to ~3.4%; Opex, traction in deposits, and increase in deposit cost to be key monitorables

5. Union Bank of India

The brokerage rated the stock of Union Bank Of India a "Buy" with a target price of Rs 100 apiece. According to the brokerage, if you buy the stock at the current market price, it could fetch 25% gains. The current market price of the stock on NSE is Rs 80.50 apiece, trading 0.06% down.

It is India's one of the leading PSU banks having a market capitalization of rs 54,609.63 crore. It is a mid-cap banking stock. The stock in the past 1 week surged 3.08% and fell 3.02% in the past 1 month. In 3 months it gave a whooping 80.47% positive return. In 1 year it gave 73.7% and in 3 years it gave 46.85% positive returns, respectively. In 5 years it gave 44.67% negative return.

Brokerage's Views

• Expect loan growth to witness steady traction; Traction in deposits to be key monitorable.
• Expect margin to remain stable at 3.2%; Rise in deposit costa and opex to be monitored.
• SMA and restructuring book are key monitorables.
• Expect steady improvement in asset quality.

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. 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.