Buy Allahabad Bank; target of Rs 200: Nirmal Bang

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Buy Allahabad Bank; target of Rs 200: Nirmal Bang

Nirmal Bang is bullish on Allahabad Bank and has recommended buy rating on the stock with a target of Rs 200 in its September 27, 2011 research report.

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Nirmal Bang is bullish on Allahabad Bank and has recommended buy rating on the stock with a target of Rs 200 in its September 27, 2011 research report.

"Allahabad Bank has continuously kept on increasing its dividend ratio barring FY'09, the year of global financial crisis. The dividend per share has doubled from Rs.3 in FY'07 to Rs.6 in FY'11, registering a CAGR of 19%. Considering the increase in the latest quarterly earnings, we expect the Bank to declare a dividend of Rs.7 for FY'12E and Rs.7.5 for FY'13E. At the present price, the stock trades at an attractive dividend yield of 4.4%.  The share price of Allahabad Bank has corrected by ~40% from it's 52 week high levels of Rs.271 its FY'11 book value level of Rs.160. This correction in the share price has made the valuations very attractive."

"The gross NPAs stand at 1.6% with a PCR (Provision Coverage Ratio) of 63.3% as on June 30, 2011. The loan book growth stood at 30% during Q1FY'12. We expect this trend of posting higher than systemic loan growth to continue going forward also.   The Bank has guided for NIM of 3% for FY'12E as compared to NIM of 3.38% during FY'11. The CASA ratio as on date stands at 32%."

"Allahabad Bank has posted a Net Interest Income of Rs.4022.5 crore during FY'11 compared to Rs.2650.5 crore in FY'10, registering an increase of 51.7% y-o-y. The net profit for FY'11 stood at Rs.1423.1 crore compared to Rs.1206.3 crore during FY'10, a jump of 17.9% y-o-y. This translates into an EPS of Rs.31.4. During Q1FY'12, the Bank has posted a Net Interest Income of Rs.1175.5 crore compared to Rs.850.4 crore during the corresponding period last year, an increase of 38.2% y-o-y. The net profit for the quarter stood at Rs.418.1 crore compared to Rs.347.1 crore, an increase of 20.4% y-o-y. The EPS for the quarter stood at Rs.8.8."

"Considering the fact that at the present price, the Bank is trading at 1x FY'11 book value and a P/E of 5.1, the share appears attractive from a valuation perspective. Since the Bank has an RoE of +20% and RoA of +1% we expect the share price to be Rs.200 (upside: 24%) over the next 6 months," says Nirmal Bang research report.  

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To read the full report click on the attachment