This PSU Banking Stock Zoomed More Than 120% In 1 Year, ICICI Direct Recommends Buy For Robust Gains

ICICI Direct picks Bank Of Baroda with a "Buy" rating in its recently published report PSU Bank - Thematic report on December 22, 2022. The brokerage has given a target price of Rs 220 to the stock of the bank. If you buy the stock at the current market price, considering the given target price, it could fetch a healthy return of up to 25% in 12 months.

Bank of Baroda is among leading PSU banks with a global loan book of ~Rs 8.7 lakh crore and has better operating metrics among PSBs. Pan-India presence with over 8161 branches and 11461 ATMs. The bank has a meaningful presence in international operations with its JVs and subsidiaries. Also, ~18% of total business comes from overseas. It is a large cap PSU banking company with a market capitalisation of Rs 91,326.26 crore.

Stock Outlook & Returns

The current market price (CMP) of stock on NSE is Rs 176.60/share, 0.54% down from its previous close. The stock recorded its fresh 52 week high on 9 December 2022 at Rs 197.20, while its 52-week low was recorded on 27 December 2021 at Rs 77.05, respectively. 
The shares declined 4.33% in the past 1 week. Whereas, in the past 1 and 3 months, the shares surged 5.91% and 27.56%, respectively. It has given 121.16% positive returns in the past 1 year. It gave 75.37% positive returns in 3 years and 5.12% positive returns in 5 years, respectively.

Highlights

Well placed with a healthy recovery in growth as well as profitability.

• Moderation in stressed asset with GNPA down from peak of 12.3% in FY18 to 5.3% in Q2FY23. R/s book steady at 2.5%. Receding slippages coupled with elevated coverage book at ~80%.
• Decadal high margins at 3.3% coupled with anticipated improving efficiency aiding uptick in RoA to ~1%.
• Robust CET1 at 11.6% in Q2FY23 to support further balance sheet growth.
• Healthy uptick in advance growth (19% in Q2FY23) with sustained focus on retail & MSME.

Buy for Rs 220/share target price

Bank of Baroda has reported a continued improvement in business growth as well as asset quality, which is expected to aid return ratios and, thus, valuations. "We retain our BUY rating on the stock. We value the bank at ~1.1x FY25E ABV and revise our target price to Rs 220/share from Rs 170/share earlier," ICICI Direct said.

Key triggers for future price performance

• Advantage of faster repricing of loans should continue in the next couple of quarters. Guidance maintained 10 bps higher at 3.2-3.25%.
• Continued growth in advances in line with industry. Any moderation in retail loan growth to be offset by a gradual pick-up in corporate book growth.
• Steady C/I ratio, lower credit cost to aid healthy earnings growth momentum.
• Guidance continued to remain at RoA - 1% in FY24E with an upside bias.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. 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.