Sell Canara Bank; target Rs 239: AnandRathi

AnandRathi is bearish on Canara Bank and has recommended sell rating on the stock with a target price of Rs 239 in its August 05, 2013 research report.
  • Language
  • App
  • Subscriptions
  • Specials
  • Sign-In
  • Register
GeStepAhead GrowMyMoney IThe Winning Leap SME Special
Moneycontrol

Home » News » Recommendations

Aug 06, 2013, 07.06 PM | Source: Moneycontrol.com

Sell Canara Bank; target Rs 239: AnandRathi

AnandRathi is bearish on Canara Bank and has recommended sell rating on the stock with a target price of Rs 239 in its August 05, 2013 research report.

Like this story, share it with millions of investors on M3

Sell Canara Bank; target Rs 239: AnandRathi

AnandRathi is bearish on Canara Bank and has recommended sell rating on the stock with a target price of Rs 239 in its August 05, 2013 research report.

Post Your Comments

Share Cancel

(more)

, AnandRathi |

AnandRathi's research report on Canara Bank

"Canara Bank's advances rose 10.8 percent yoy (3.2 percent qoq), deposits grew faster, at 14.2 percent yoy, thereby decreasing credit-deposit 199bps yoy to 65.4 percent. Advances growth was driven by the priority sector (27.3 percent yoy) and farm loans (38 percent yoy). While NIM fell 17bps yoy (3bps qoq) to 2.2 percent, the proportion of CASA decreased 16bps yoy (106bps qoq) to 23.1 percent."

"While fee income grew 16.2 percent yoy (3 percent qoq), trading profits rose 349 percent yoy to Rs 4.4bn and comprised 23.4 percent of pre-provisioning profits (7.1 percent in 1QFY13). Productivity worsened, with core cost-to-income increasing 92bps yoy to 47.8 percent. With modest business growth prospects, fee income and operating leverage are unlikely to improve substantially. Over FY13-15, we expect fees to post a 15.7 percent CAGR, with cost-to-assets at ~1.3 percent."

"Gross NPA grew 17.1 percent qoq, with fresh slippages of Rs 26.9bn (annualised, 4.5 percent of loans). NPA coverage fell 41bps qoq to 15.3 percent and is still the lowest of peers. In 1QFY14, Rs 16.8bn of loans were restructured, with total restructured loans at Rs 199bn (8 percent of loans)."

"Due to lower credit growth and higher NPA assumptions, we slash our FY14 and FY15 net profit estimates 33.1 percent and 28.4 percent respectively. Hence, we lower our target from Rs 405 to Rs 239. We maintain our Sell rating, since we expect near-term profitability to be constrained by sluggish business and weak asset quality. Also, the RBI's recent liquidity-tightening measures are a valuation overhang. While the present valuation appears to price in asset-quality concerns, persisting perceptions of default risk would restrict a valuation re-rating. At our Mar'14 target, the stock would quote at PABV of 0.6x FY14e and 0.5x FY15e. Our target is based on the two-stage DDM (CoE: 14.5 percent; beta: 0.9; Rf: 8 percent). Risks. Faster credit growth, sharp decline in defaults," says AnandRathi Securities research report.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click here

Tags  AnandRathi
Buy, Hold, Sell ? Hear it first on M3
Sell Canara Bank; target Rs 239: AnandRathi

See all

Get started using your favorite social network

or

Login using moneycontrol ID

Username
Password

Need help logging in? Reset password.

Don´t have an account? Sign Up

Get started using your favorite social network

or

Simply sign up using this short form

* mandatory

UserName*

Username should be atleast 4 character

Password*

Password should be 8 or more characters,
atleast 1 number, 1 symbol & 1 upper case letter

Alert

Your Password should contain
  • 8 or more characters
  • At least 1 number
  • At least 1 symbol
  • At least 1 upper case letter
Confirm Password*
Email
Already have an account? Login