Stock To Buy: PSU Bank Stock Hits 3rd 52-Week High In A Row, TP Rs 105: Sharekhan

Leading brokerage firm Sharekhan has assigned buy call to public sector undertaking Punjab National Bank share with target price of Rs 105 per share. Last trading price of PNB share is Rs 86.71 apiece with intraday gain of 1.49%. PNB shares hit 3rd consecutive 52-week high today. If you buy PNB shares at last trading price of Rs 86.71, you can obtain likely upside of 21.09%. PNB shares rallied 66% in last 6-months.

According to Sharekhan, improvement in asset quality and a strong outlook are likely to help in faster normalization of credit cost thereby improving the visibility for improvement in return ratios.

PNB Stock Performance & Return: The stock's 52-week high price is Rs 87.20 per share and 52-week low price is Rs 44.41 apiece, respectively. The company has a market capitalisation of Rs 95,476.52 crore. PNB shares gained 66% in last 6-months, soared 52% year-to-date, jumped 56% in last 1-year, and offered return of 125% in last 2-years. In last 3-years, Punjab National Bank stock gained 142% and rallied 31% in last 5-years. PNB shares declined 27% in last 10-years.

PNB Valuation: According to Sharekhan, "Provisions are largely related to the back book (Net NPL and restructured book), which would be accounted for in FY2024E. Thus, credit cost is expected to fall significantly in FY2025E, as net NPA declines steadily in FY2024E to below ~1% along with the rundown of the restructured book, which should significantly boost the return ratios. The bank has guided for the exit RoA in FY2025E closer to ~1%. At CMP, the stock trades at 0.8x/ 0.7x its FY2025E/FY2026E BV."

Key Risks: Sharekhan said, higher-than-anticipated credit cost and lower-than-expected margins can be the key risks.

PNB Financials: The leading bank announced a surge of 327% in its net profit year-on-year (YoY) at Rs 1756 crore for the quarter ended September 2023 as against Rs 411.27 crore in the corresponding quarter of last year. Meanwhile, its net interest income or NII (difference between interest earned from lending activities and interest paid) soared to Rs 9923 crore in September quarter of current financial year. The company's operating profit jumped 11.66% to Rs 6216.43 crore in Q2 as against Rs 5567 crore corresponding quarter of last fiscal.

Disclaimer: The stock has been picked from the brokerage report of Sharekhan. 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 check with certified experts before taking any investment decision.