With Rs 5.50/Share Dividend, This Public Sector Bank Stock Gets A 'Buy' Rating

Top stock-broking firm, Prabhudas Lilladher has given a Buy rating to the stock of Bank of Baroda, a public sector bank. The brokerage house believes that investing in this bank can fetch you a return of nearly 25.67%, based on the evaluation of the bank's quarterly results. In its recent board meeting, the bank also recommended a dividend of Rs 5.5 per share.

Dividend Details

Through the securities exchange filing, the Bank of Baroda made the dividend announcement on May 16. As per the filing, the Board of Directors recommended a dividend at Rs 5.50 per equity share for the FY2022-23 subject to declaration/approval at the ensuing annual general meeting (AGM), scheduled to be held on 07th July 2023.

Further, the board fixed 1st July 2023 to 07th July 2023 (both days inclusive) as Book Closure dates for AGM and dividend payment. The cut-off date set is 30th June 2023 to record the names of the eligible shareholders entitled to the dividend.

Q4FY23 Performance

Bank of Baroda was established on July 20, 1908, as a State-owned banking and financial services organization. Its headquarter is situated in Vadodara (earlier known as Baroda), in Gujarat, India.

The bank witnessed a healthy quarter as core PpoP came in at around Rs 80 billion beating Prabhudas Lilladher's estimates by 8.4% largely led by better fees and TWO recovery. Its asset quality was stronger as GNPA declined by 74bps QoQ to 3.8% due to lower net slippages.

Exposure to the stressed Go-First airline is Rs 13 billion against which the bank carries a provision of Rs 5 billion while collateral cover totals Rs 10 billion, as per the broking firm's research note. ECL impact could be 1-1.5% of loans and bank would like to keep credit costs under 1% including the ECL effect.

According to the brokerage house report, the public sector bank expects loan growth of 13-14% in FY24E and retail share could improve. Momentum in unsecured loans should continue given its low share (2%).

Valuation & Rating

Despite the net interest income for FY23 being 3.3% Prabhudas Lilladher factors a 12bps decline in FY24 margins. It also, highlights that there is scope for an upgrade as retail share could increase, MCLR share is higher at 50% and the fixed rate loans would reprice upwards in FY24E. "So, the valuation at 0.9x is attractive; maintaining multiple at 1.2x we roll forward to Mar'25 and raise the target price from Rs 220 to Rs 235. Retain 'BUY'", added the stock-broking firm.

Scrip Movement

The last closing price of Bank of Baroda stock is Rs 180.45 per share, which has fallen by 2.91% on an intraday basis. In the last one year, the share price has surged by 81.45%, and in over three years it has soared by 394.38%.

Disclaimer

The stocks have been picked up from the brokerage reports of Prabhudas Lilladher Greynium Information Technologies, the author and the brokerage firms 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.