This PSU Banking Stock Can Surge Upto 45%, "Buy" Says Motilal Oswal

A recommendation to buy stock of Bank of Baroda was given to investors from Motilal Oswal, a leading brokerage company. This public sector unit banking stock will surge upto 47% Rs 240 per share from Rs 164 per share, based on the Motilal Oswal's research estimates. Bank of Baroda, posted a strong quarter. Margins witnessed an expansion to 3.4%, highest-ever profit of Rs 38.5 billion.

3QFY23 results update of Bank of Baroda

The quarterly results of Bank of Baroda were good, as per the brokerage report. Higher net interest income (NII) and other income, resulted in strong earnings beat, also business growth was healthy. "Bank of Baroda reported a strong quarter as pre-provision operating profit (PPoP) grew 50% YoY, aided by higher NII and other income, resulting in strong earnings beat. Business growth was healthy with loans growing 6.5% QoQ and margins expanding 4bp QoQ (24bp QoQ on an adjusted basis). Asset quality improved as slippages moderated to Rs 28.8b, resulting in GNPA/NNPA at 4.5%/1%, respectively, while provision coverage ratio (PCR) stood stable at approximately 79%. Total special mention accounts (SMA )1/2 (>Rs 50 million) stands controlled at 40bp of loans, while restructured book moderated to 1.9% of loans. Bank of Baroda reported a profit (PAT) of Rs 38.5 billion (Estimated: Rs 27.7 billion; significant beat), driven by higher NII and other income. NII grew 26% YoY (up 6.3% QoQ; 11% beat) as margins increased 4bp QoQ to 3.37% (2QFY23 included 20bp impact due to an account upgrade and unwounding of an international swap). Advances grew 6.5% QoQ (up 22% YoY). Among segments, Retail loans grew 5.3% QoQ (29.4% YoY), while Corporate book grew 9% QoQ. SME/Agri book grew 2%/4% QoQ, respectively. Deposits grew 18% YoY (5.4% QoQ). Domestic CASA ratio moderated to 41.6%."

Outlook: Buy Bank of Baroda stock, with a price target of Rs 240 per share

According to Motilal Oswal brokerage coverage report, investors should buy the stock of Bank of Baroda, because the PSU's NII will increase along with other income, thus the stock price also go upto Rs 240 per share. "With healthy NII growth and 'other income' Margins witnessed an expansion to 3.4%.driving earnings, bank of Baroda reported a strong quarter. Business growth was healthy at 6.5% QoQ, aided by strong traction across segments. Current account savings account CASA) mix saw moderation as growth in term deposits (mainly bulk deposits) stood higher. Asset quality continues to improve with net non performing assets (NNPA) at less than 1%. A lower SMA book and controlled restructuring provides further comfort on asset quality. We increase our earnings estimate sharply by 21% for FY23 and 13-14% for FY24/25, factoring in higher NII and other income. We estimate FY25 RoA/ RoE of 1.1%/15.3%, respectively, and value the stock at Rs 240 (1.1x Sep'24E ABV). We reiterate our Buy rating on the stock."

The stock of Bank of Baroda ended at an intraday high of 2.54% at Rs167.80 per share and its market capitalisation is Rs 86,775.46 crore If you invest now at the current price and hold it till the target price of Rs 240 per share you will earn potential returns of 43.03%. Within a year the stock of bank of Baroda has surged up 42.32%. The 52-week high is at Rs 197.20 per share and 52- week low is at Rs 89.90 per share.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal, 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.