Shares of Bank of Baroda (BOB) rallied over 12 per cent in Monday’s trade after the company reported a strong core pre-provision operating profit (PPoP) growth of 39 per cent in September quarter, with lower provisions and healthy net interest income (NII) growth. Analysts have increased their FY23 earnings per share (EPS) estimates for the stock by up to 24 per cent. Their price targets on the PSU banking stock suggests a potential upside of up to 8 per cent over Monday’s high level.
The stock rose 11.89 per cent to hit a 52-week high of Rs 161.75 on BSE. With this, the scrip is up 89 per cent year-to-date.
The lender reported a 59 per cent YoY rise in its net profit at Rs 3,313 crore for the September quarter. NII rose 34.5 per cent to Rs 10,714 crore while gross non-performing assets (NPAs) declined to 5.31 per cent of the gross advances from 8.11 per cent in the year-ago period.
The bank has guided for slippages to be 1.5-2 per cent for FY23 while credit cost guidance has been revised downwards to 1-1.25 per cent from 1.25-1.5 per cent earlier. Overall, the bank expects FY23 margins to be 10 bps higher than that in FY22 and return on asset (RoA) to be slightly lower than 1 per cent in FY23 and crossing 1 per cent in FY24.
Motilal Oswal said business growth in the quarter was healthy at 5 per cent sequentially, led by the RAM segment and international book.┬а
“Asset quality continues to improve with CE strong at 98 per cent. A lower SMA book and controlled restructuring book provide further comfort. We increase our FY23 earnings by 10 per cent, factoring in higher NII and lower credit cost and largely maintain our estimates for FY24. We estimate FY24 RoA/RoE of 1 per cent/13.9 per cent and value the stock at Rs 175 (0.9 times FY24E ABV). We reiterate our Buy rating on the stock,” the brokerage said.
Nuvama Institutional Equities has upped its EPS estimate by 24 per cent each for FY23 and FY24 on higher growth and net interest margin (NIM). “Accordingly, we are revising up the target to Rs 170 (0.9x BV FY24E) from Rs 136. BoB is among the few large bank stocks that is still trading below book. Besides, with its RoA likely to rise to 0.9 per cent in FY23/24E from 0.6 per cent in FY22, we recommend a тАШBUYтАЩ,” it said.
Emkay said a Strong credit growth at 21 per cent YoY was supported by continued strong traction in the retail and overseas book. The bank expects domestic corporate growth to accelerate too, more so in the seasonally-strong Q4. That, coupled with continued asset re-pricing, should keep margins healthy, Emkay said.
“We have revised our earnings for FY23-25E by 18-22 per cent and the rollover target to 0.8 times September 2024E ABV, leading to revision in target to Rs 175 from Rs 140,” it said.
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