Buy Canara Bank, target Rs 646: Karvy

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Karvy Stock Broking has recommended a buy rating on Canara Bank , with price target of Rs 646, in its report dated February 5, 2010. The stock closed at Rs 393.45 on February 4, 2010.

"During FY09-11, we estimate Canara Bank's total business and bottomline would report 20.4% and 29% growth on CAGR basis; the bank would report RoAA of 1.0-1.4% and RoAE of 23-29%. On profitability side the bank's performance was much better than our estimates. We revise our earning estimates upward for FY10 and FY11 by 76% and 57% to Rs 34 billion and Rs 34.3 billion respectively and increase our target price by 68% to Rs 646; we have valued the bank on Gordon growth model with 24% RoAE and cost of equity of 14.3% and sustainable constant growth of 5.0%. We upgrade our rating on the stock to BUY with a target price of Rs 646 at 2.04x adjusted book value FY11," says Karvy Stock Broking report.

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