PSU Bank Stock Scaling New Heights, Prabhudas Lilladher Says Buy For Good Gain

Brokerage firm Prabhudas Lilladher has recommended investors to buy Bank of Baroda with a target price of Rs 220 apiece. The current market price of the stock is Rs 179 apiece. If you buy Bank of Baroda, you will potentially get 23% upside. According to the analyst, "We remain positive on Bank of Baroda (BOB) given, 1) domestic corporate credit is reviving as growth touched an 8-yr high of +13% YoY." Check key details below:

1. Bank of Baroda Stock Performance & Return

The current market price of the stock is Rs 220 apiece with an intraday fall of 0.41%. The stock's 52-week high is Rs 197 apiece and 52-week low is Rs 89 apiece, respectively. It has a market capitalisation of Rs 93,420.66. The stock has given 35% return in last 3-months, 65% return in last 6-months, 94% return in last 1-year, and 86% in last 3-years.

2. Key Beneficiary Of Abating Asset Quality Risks

As per RBI, GNPA ratio of SCBs continued to decline and stood at 5.0% (PSU 6.5%) in Sep'22 (7-yr low). Reduction has been broad based with stress decreasing across sectors of industries, agriculture, services & personal loans.

Concentration risk at system level has reduced as large borrowers' share in gross SCB loans/GNPA is falling. For BoB, gross slippage ratio was controlled in H1FY23 at 2.3% vs 2.9% in FY22 while net slippage ratio too has materially declined from 0.8% in FY22 to 0.2% led by strong recoveries.

3. Reducing Stress Providing Growth Impetus

With asset quality risk reducing, lending pace in system gained further traction during H1FY23 as credit growth reached 17.3% as at 16th Dec'22 (10-yr high) also driven by corporate credit reviving to an 8-yr high (+13% YoY in Nov'22).

4. Valuation

According to Prabhudas Lilladher, "We had recently raised FY23E earnings by 8% for BoB, however, with asset quality risks abating and steady credit growth outlook, there is likelihood of further earnings upgrade. Rolling forward to Mar'25 ABV, we raise multiple from 1.0x to 1.1x and maintain TP at Rs220. Reiterate 'BUY'.

5. About Bank of Baroda

Bank of Baroda is one of India's largest banks with a strong domestic presence spanning 9,449 branches, and 13,153 ATMs and Cash Recyclers supported by self-service channels as of Sep'19. The Bank has a significant international presence with a network of 100 branches/ offices subsidiaries, spanning 21 countries, according to the official website of Bank of Baroda.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. 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.