Dear All,
Forwarding you the Result Update on Punjab National Bank for 4QFY2011 with a Buy recommendation and a Target Price of `1,326 (12 months).
For 4QFY2011, PNB posted moderate net profit growth of 5.8% yoy to `1,201cr, in line with our estimates at the PBT level but slightly above expectation at the net profit level. However, NIM was below expectations, offset by higher treasury profits and a sharp pick-up in recoveries from written-off accounts. We recommend Buy on the stock due to attractive valuations.
Healthy business growth but pressure on NIM and asset quality: The bank continued to witness healthy business traction during 4QFY2011 as well. This strong growth led to credit market share gains for the bank of 11bp yoy during FY2011 to 5.44% and deposit market share gains of 6bp yoy to 5.29%. CASA deposits growth moderated to 18.1% yoy from 22.0% yoy growth in 3QFY2011. Reported CASA ratio declined by 50bp qoq and 160bp yoy to 39.2%. Due to the sharp rise in cost of funds (37bp qoq) and flat yield on advances, reported NIM dipped by 22bp qoq to 3.91%. Asset-quality pressures continued to persist for the bank, with annualised slippage ratio rising to 2.7% from 2.1% in 3QFY2011. Even for FY2011 as a whole, slippage ratio of 2.3% was the highest in the past four years. Consequently, NPA provisions more than doubled to `2,004cr in FY2011 from `994cr in FY2010. However, due to substantial `1,000cr write-offs in 4QFY2011, overall gross NPAs registered a sequential decline of 3.6%. Net NPAs rose substantially by 29.4% qoq due to lower provision coverage. Provision coverage ratio including technical write-offs declined to 73.2% from 77.2% in 3QFY2011 and 81.2% in 4QFY2010. The bank took a hit of `1,131cr towards second pension option liability and `113cr towards gratuity in FY2011.
Outlook and valuation: Post the recent correction in the stock, it is trading at attractive valuations of 1.2x FY2013E ABV vs. its five-year range of 1.1–1.6x and median of 1.4x. Hence, we recommend Buy on the stock with a target price of `1,326, valuing it at a multiple at 1.5x FY2013E ABV.
Kindly click on the following link to view the Report.
Punjab National Bank - 4QFY2011
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
No comments:
Post a Comment