PSU Banking Stock Under Rs 100 To Buy, Likely To Give 33% Strong Return: LKP Securities

LKP Securities has a Buy on Punjab National Bank (PNB) for a target price of Rs 80 per share. The brokerage claims a potential upside of up to 33% from its current level if purchased at the current market price. The target period for the stock is 12 months.

PNB is a large-cap PSU Banking stock. It has a market capitalisation of Rs 66,715.74 Crore.

Recovery to accelerate further with ease in corporate stress

According to LKP Securities, Reported GNPA ratio is improving continuously since previous 14 quarters with an exception of 1QFY22 as NPA recognition resumed. Slippages during the previous quarter were curtailed at ₹40bn (~3% v/s run-rate of 8% over last four quarters); this restricted GNPA/NNPA to 8.7%/2.7% (v/s 16.3%/7.2% fourteen quarters ago). The headline numbers clearly suggesting a steady improvement driven by higher recovery and write-offs. In FY23, PNB plans to transfer bad loans of ₹20bn to the NARCL (Bad Bank) in tranche 1 and ₹60bn in tranche 2. These loans are 100% provided for and management believes it may be transferred at 25%. NARCL will make payments using a combination of cash and Security Receipts (SRs). A further recovery of ₹5bn and ₹13bn in 1QFY24 and 2QFY24 respectively. This may aid PNB's equity capital position in the interim (CET1 currently at 12.7%). Management guidance is quite affirmative and it expects GNPA and NNPA ratio to reduce further in FY24E with credit cost guidance of 1.5%. "Under base case scenario, we estimate the NNPA to be at 2.6% as on FY24E with healthy PCR of more than 73%." the brokerage has said.

Stock Movement

On Monday, the last traded share price of PNB on BSE is Rs 60.59 apiece, up 0.28% compared to its previous close. It was opened at Rs 60.70 apiece. Its 52-week low is Rs 30.06 apiece and its 52-week high is Rs 62.38 apiece, respectively.

The stock jumped 12.54% in the past 1 week, and 17.95% in the past 1 month, respectively. In the past 1 year, it jumped 97.68%. In the past 3 years, it jumped 72.87%. It has fallen 22.22% in the past 5 years.

Disclaimer - The stock has been picked from the brokerage report of LKP 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.