PNB can test Rs 800, says SP Tulsian

Tulsian told CNBC-TV18, "The reason Punjab National Bank (PNB) to get the beating and hitting the 52 week low is because of rise in the gross non performing assets (NPA) and net NPA and maybe a marginal fall on the return on assets which fell to about 1 to 0.8% and the NPAs rising on both gross and net front."

He further added, "Looking at the other side, they have the highest net interest margin (NIM) for the June quarter amongst all the public sector banks. They have NIM of 3.6%. If you go by the status of the bank, this is the second largest public sector bank, after State Bank of India, the largest nationalised bank with 5,700 branches. Because of the good NIM of 3.6%, the company posted an earning per share (EPS) of about Rs 37 for Q1."

"The situation is really bad. If you take the call on aviation, telecom, infrastructure, power generations, practically you have defaults and the sticky loans in each quarter. For instance, Kingfisher, if the banks are able to realise the money, which I am quite hopeful that maybe in two-three months we are bound to see that, you may have the write back of the NPAs or the provisions earlier created by the bank."

"If I go by the present book value of Rs 815 and if I am expecting about Rs 110 EPS in remaining three quarters and knock off expected dividend payout of Rs 25, that leaves me with a book value of Rs 900 as on March 31, 2013. The book value, as of today, is Rs 815. So, share is ruling at a price to book of 0.75. We have not seen this kind of price to book for the larger PSU banks."

"Even if you take a call as the second, third and fourth largest bank like Bank of Baroda (BoB) and Canara Bank , if I compare this bank with BoB then BoB even today is ruling at a price to book of 9. Even if take the expected EPS of close to Rs 120-125, even that is virtually ruling at the same level of Rs 625-630."

"Taking all this into consideration, I think the stock has very limited downside. The Bank Nifty is playing little trick or maybe the technical play is happening on the Bank Nifty. Till expiry, it may remain weak. I am expecting the Bank Nifty to hold at the level of 10,000, but again expect the upmove in Bank Nifty in September series where we may see Bank Nifty moving back to 10,600-10,700. In that, the larger PSU banks like PNB, SBI, BoB will also be contributing."

"Taking all this into consideration, I think PNB looks good on a fundamental basis. In about four-five months, one can expect a price of Rs 800 with very limited downside."