Karur Vysya Bank has target of Rs 625: PN Vijay

Karur Vysya Bank has target of Rs 625, says PN Vijay, Portfolio Manager, askpnvijay.com.

Vijay told CNBC-TV18, "My midcap pick is Karur Vysya Bank, a Tamil Nadu based commercial bank. The reason  passing of the banking companies regulation bill by both houses of parliament is expected to lead to a sea change in the environment for private banks in 2013 and one expects a lot of strategic play and M&A in the sector. Karur Vysya Bank could be actively involved in some form or the other in this. Even otherwise it is a good bank."

He further added, "During the FY12 it had a good Earnings Per Share (EPS) of Rs 47 with income being about Rs 2,370 crore and net profit being about Rs 502 crore. The good form continued in the first half of 2012 with profits being about Rs 279 crore and the EPS being about Rs 26 or so."

"The asset quality of the bank has been traditionally good and as of now the net NPAs are pretty low 0.38. In terms of valuations, it is trading at a price-to-book of about 1.5 times its 2013 expected earnings and at an EPS of close to Rs 9 which is attractive by any standards."

"So at the current price of Rs 507 or so I recommend the stock for medium-term investors with a price target of Rs 625. There is no serious risk to this investment except a possible deterioration of the Indian economy and NPAs, but that is a very remote possibility and so Karur Vysya is a fairly safe bet."

Disclosure: I have no holdings in the above stocks.