LKP Research has given Buy recommendation for Bank of Baroda with a target price of Rs. 128 in its research report issued on May 17, 2022
LKP Research’s research report on Bank of Baroda
In 4QFY22, Bank of Baroda (BOB) has delivered an expected result on operating and assets quality front. The fresh slippages were higher at ₹45bn v/s ₹28bn in 3QFY22. Furthermore, the reduction (up-gradation & recovery) stood ₹77bn v/s ₹70bn in the previous quarter. Its reported GNPA (6.61% v/s 7.25% in 3QFY22) and NNPA (1.72% v/s 2.25% in 3QFY22) declined substantially along with higher PCR (incl. TWO) of 89%. The bank has witnessed healthy sequential growth in net advances (10% YoY, 6% QoQ) and deposit growth (8.2% YoY, 7% QoQ) with better liquidity position (LCR of 140% +). Moreover the bank has reported net profit of ₹17.8bn on the back of higher provision (₹37bn v/s ₹25bn in the previous quarter). Restructuring pool down sequentially and stood ~2.4% of net advances. We believe the negatives are in the price and risk reward remain attractive with an inexpensive valuation (0.6x PBV). Thus reiterate BUY.
We expect the bank to post a ROA/ROE of 0.7%/10.8% by FY23E led by steady balance sheet growth along with higher PCR and improving asset quality. We value the standalone bank with PBV of 0.8xFY23E Adj. BVPS of ₹160 to reach a price target of ₹128 (revised from ₹136). We recommend BUY with potential upside of 28%.