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This Multibagger Banking Stock Grew 53.61% In 3 Months, Hits 52 Heek High, Buy For 26% Robust Gains

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Ajcon Global in its report published on 1 December 2022 on Bank of Maharashtra maintains a positive outlook with a "buy". The brokerage has an estimated target price of Rs 34.72 per share of the stock. According to the given target price, the stock is likely to give a return of up to 26% from its current level. Bank of Maharashtra is a small-cap Public Sector Bank (PSB) in Maharashtra engaged in providing banking services. The Bank's segments include Treasury, Corporate/Wholesale Banking, Retail Banking and Other banking operations. It has a market cap of Rs 18,609.82 crore.

 

Stock Overview

Stock Overview

Monday, 5 December 2022, the stock of Bank of Maharashtra on NSE last traded at Rs 24.65 per share, gaining 1.10% from its previous close. The stock hit its new 52 week high on 22 November 2022 at Rs 30.05 and 52 week low on 20 June 2022 at Rs 15, respectively.

The stock in a week jumped by 1.28%. The share in the past 1 and 3 months jumped by 21.54% and 53.61%, respectively. It has given 42.16% positive returns in the past 1 year, whereas, in the past 3 years, it has given 124.8% multibagger returns. However, in the past 5 years, the returns fell, giving 4.73% positive returns.

 

Buy for a target price of Rs 34.72 per share
 

Buy for a target price of Rs 34.72 per share

At CMP of Rs. 26.45, the stock is valued at a P/BV of 1.52x (Book Value per share as on H1FY23 - Rs. 17.36) which we believe is reasonable and at discount to some of the peer PSU Banks considering the strong fundamentals of the Bank. After strong turnaround and overall transformation in the last few years, we expect the Bank to reach the next orbit in the coming years.

 
"We recommend a "Buy" with a target price of Rs. 34.72 (P/BV multiple of 2x at H1FY23 Book Value), " the brokerage said.

Brokerage's views

Brokerage's views

The brokerage believes the Company deserves a premium in valuation due to the following factors: 

  • The Bank has improved its performance significantly on all fronts from FY18 when the Bank was under severe pressure and is now consistently reporting good performance in the last few years and several quarters. From Net loss of Rs. 4,784 Crore in FY19 the Bank reported Net profit of Rs. 1,152 Core in FY22 and Rs. 987 Crore in H1FY23. 2).
  •  
  • CASA share in Total deposits has improved significantly from 48 percent in FY18 to 56.27 percent as on Q2FY23. As a result, NIMs have improved from 2.32 percent in FY18 to 3.41 percent as on Q2FY23. 3).
  • Today, Bank of Maharashtra has become, one of the most efficient PSU Bank with Cost/Income ratio of 38.82 percent as on Q2FY23 from 55.24 percent in FY18. 4).
  • On the asset quality front, the Bank has improved by leaps and bounds over the past few years after being in pressure in FY18 and FY19. The Bank's Gross NPA ratio has come down to 3.40 percent in Q2FY23 from 19.48 percent in FY18. Net NPAs have come below 1 percent in Q2FY23 from 11.24 percent in FY18. The Bank is well provided for Stressed Book (PCR further improved to 96.06 percent from 58.71 percent in FY18), comfortable credit cost of 1.04% (annualised) for Q2FY23. 5).
  • The Bank's Impressive CASA share in total deposits has improved to 56.27 percent as on Q2FY23 from 47.74 percent in FY18. 6).
  • In Q2FY23, the Company delivered strong overall performance on various parameters like credit growth, good NII growth, improved treasury performance despite macroeconomic headwinds like rising bond yields etc., good outlook for the future - As per Shri. A.S. Rajeev - Managing Director and Chief Executive Officer of the Bank, the bank aims to maintain NIM in the range of 3.50%, advances growth of 20-22% (upto 25%). The Management expects Credit cost in the range of 1.3 - 1.4 percent for FY23 which is very encouraging. Strong capital adequacy, consistent improvement in RoE and RoA in stills confidence in the Bank.
Disclaimer

Disclaimer

The stock has been picked from the brokerage report of Ajcon Global. 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 making any investment decision.

Story first published: Monday, December 5, 2022, 18:54 [IST]
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