Monday, February 25, 2019

Moneycontrol recommends buying SBI and Canara Bank

Image result for canara bank logo

Image result for sbi bank logo is recommending two PSB stocks for long term. They are SBI and Canara bank.

1. SBI |Rating: Buy | CMP: Rs 271 | Target: Rs 319 | Return: 18 percent| Long term

Net Profit was at Rs 3,955 crore, 318.56 percent rise during Q3FY19 against loss of Rs 2,416 crore in the preceding quarter of the previous year. Credit cost has declined sharply by 105 bps providing cushion for earning growth. 

There has been sustained improvement in asset quality with GNPA, Net NPA and PCR improving to 8.71 percent, 3.95 percent and 74.63 percent, respectively. Moreover, recovery in Written-Off accounts registered a very robust growth of 81.94 percent YoY from Rs 3,221 crore in 9MFY18 to Rs 5,860 crore in 9MFY19.

Loan growth in FY19 for SBI is guided to be 14 percent, in line with industry slated growth at 15 percent. As the bank is still short of priority sector lending target and keeping this in line, management expects to bring in around Rs 45,000 crore loans from NBFCs. 

The recent moderation in bond yields is expected to provide a boost to treasury performance additionally. We recommend buying the stock as SBI is available at an attractive valuation. Estimating P/BV at 1.20x  for FY20, the estimated share price turns around to Rs 319.

2. Canara Bank | Rating: Buy | CMP: Rs 222 | Target: Rs 277 | Return: 25 percent| Long term

During the first nine months of the current fiscal, the Net Interest Income grew a healthy 19.6 percent YoY. Further, the provision coverage ratio has improved 670 bps to 62.54 percent from the December 2017 level of 55.81 percent. Also, unbroken efforts to boost the asset quality have marked well for the bank. Rich restoration and up-gradations have helped GNPA decrease 31bps to 10.25 percent combined with net NPA lower by 17bps at 6.37 percent.

The capital optimisation measures taken by the bank have led to a decrease in risk-weight density to 87.39 percent as of December 2018 from 91.27 percent as of December 2018. Indeed, the well capitalized position of the bank will provide helping hands for further credit growth. Domestic NIM improved to 2.85 percent.

FirstChoiceIPO too has buy call on both the stocks as long term investment.

No comments:

Post a Comment