Buy Vijaya Bank; target of Rs 97: Bonanza

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Buy Vijaya Bank; target of Rs 97: Bonanza

Bonanza is bullish on Vijaya Bank and has recommended buy rating on the stock with a target of Rs 97 in its April 11, 2011 research report.

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Bonanza is bullish on Vijaya Bank and has recommended buy rating on the stock with a target of Rs 97 in its April 11, 2011 research report.

"Vijaya Bank posted a healthy growth of net profit of 21.6% y-o-y at Rs 151.8 crore in Q3FY11 on the back of strong net interest income (NII) growth of 36.5% y-o-y to Rs  536 crore. Net interest margin (NIM) also improved to 3.44% in Q3FY11 as against 2.65% in Q3FY10. Aggregate business of the bank touched Rs 107272 crore with a growth of 10.7% and 8.1% y-o-y in advances and deposits respectively. Management has guided for 16% y-o-y business growth and a minimum 35% growth in NII for FY11. Recent capital infusion of Rs 700 crore through Perpetual Non Cumulative Preference Shares has increased the capital base of the bank and supports its business growth. Cost to income ratio has reduced by 235 bps from 51.9% in 9MFY10 to 49.6% in 9MFY11 Capital adequacy ratio of the bank stood at 13.67% in Q3FY11 with a 9.25% tier-I capital."

"Asset quality has improved on y-o-y basis although there is increase in slippages on q-o-q basis. In Q3FY11 GNPA% and NNPA% of the bank is 2.46% and 1.38% respectively as against 2.53% and 1.30% in Q3FY10. VB has been improving its practices about managing NPA's and expects significant improvement from June 2011 onwards.  VB has a provision coverage ratio of 67.7% in Q3FY11 which is lower than the stipulated 70%PCR by 31st Mar'2011.Therefore higher provision is expected during Q4FY11."

"After a steep correction from the highs of 115, Vijaya Bank is holding above crucial support formed through the convergence of long term trend line. Recovery from lows was well supported by increasing volumes indicating upside rally to continue. On weekly chart also, the stock is showing a bullish trend reversal pattern. One should buy the stock at CMP for target price of Rs 97 with a stop loss of Rs 81.50 (closing basis)," says Bonanza research report.

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To read the full report click on the attachment