Expect 30% upside in Dena Bank: Aashish Tater

Aashish Tater, Head of Research of www.fortunewizard.com is of the view that one can expect 30% upside in Dena Bank.

Tater told CNBC-TV18, "If you see what has happened to the index first of all before I take a call on Dena Bank, the stock and the market has been making a pattern, which was 2006 and we have been upbeat on this particular index right from that 5,000 level. 5,000-6,000 then that 33 percent correction comes in, last week when we discussed we said this was very healthy for the markets. Now, this topping out business will happen somewhere around that 6,244 odd mark that is what our projecting model suggest."
He further added, "During this particular phase, there will be relative outperformance from public sector undertaking (PSU) banks because if you see the calendar event that is poised for PSU banks, we feel Dena Bank is one stock which will have an outperformance in the PSU banking space itself from the midcap PSU space. Take these two things together, you will find that this company is trading between 0.7 - 0.8 times price to book value in the banking space in the PSU space, gets re-rated to approximately 0.9 to 1.1 times."
"On P/E front, the worst case price earning multiple is assigned at around 3.5-4 times and the best case P/E multiple for this space is 5.5 times. With an upward trajectory and given that the company’s presence is in Gujarat, the western part where the cream of the business is right now doing fairly well, we feel this particular stock can outperform its peers significantly from current levels."
"So, we ran our projection model even on this particular stock. It is a quantitative call from our side. We feel that W that has been made at Rs 90.05 is a classical case where it will give you an outperformance around Rs 128.50, which is roughly 25 percent higher from current levels."
"All these factors coming together, the calendar events of RBI cutting the interest rate which is almost a given thing for next meeting and even another 25 percent cannot be ruled out given that the guidance will become more market prone then focusing on inflation control. If these two factors are combined, we feel PSU banking as a space will outperform and Dena Bank, given all these factors, will have again a significant re-rating on upside."
"Even on valuation perspective at 0.75 times price to book value, we feel this is one stock which is relatively undervalued to its peers. It is much better to switch from some large PSU bank names to this particular stock given it is just Rs 3,000 crore and it has almost 1,200 branches with the presence in India’s gross domestic product (GDP) contributor Gujarat as a main base. So, we feel all these factors 30 percent can be made from short-term to medium-term perspective on this particular stock." Disclosure: Safe to assume that stock discussed and recommended to clients but no personal position.