Buy Syndicate Bank; target of Rs 131: Angel Broking

Angel Broking is bullish on Syndicate Bank and has recommended buy rating on the stock with a target of Rs 131 in its May 11, 2012 research report.

“Syndicate Bank reported a 22.0% yoy decline in its profit before tax (PBT) to Rs248cr, despite healthy 17.6% growth in pre-provisioning profit on the back of higher provisioning expenses, partly because the bank was one of the few PSU banks which increased provision coverage sequentially. However, net profit grew by moderate 7.0% yoy on the back of negative tax expense of Rs61cr during the quarter as against tax expense of Rs30cr in 3QFY2012. We recommend a Buy rating on the stock.”
“During the quarter, business growth remained moderate. Advances grew by 15.8% yoy to Rs123,620cr, aided by healthy growth of 17.6% and 29.7% yoy in agriculture and weaker section credit, respectively. Growth in deposits was relatively high compared to advances growth at 16.5% yoy, mainly on account of 24.2% growth in term deposits to Rs108,606cr. CASA deposits grew by 10.7% yoy on account of moderate growth of 9.9% yoy in savings deposits and 12.9% yoy in current deposits. Consequently, CASA ratio dipped by 154bp yoy to 29.4%. Reported NIM improved by 15bp qoq to 3.60%. The bank’s asset quality deteriorated sequentially with slippages increasing to Rs1,059cr, much above the average quarterly run rate of Rs591cr for the past four quarters. Consequently, gross annualized slippage ratio for the bank increased substantially on a sequential basis to 4.0% during 4QFY2012 as against 1.9% in 3QFY2012. While gross NPAs increased from 2.3% to 2.5%, net NPA ratio increased from 0.9% to 1.0%. The bank increased its provisioning coverage to 80.1% in 4QFY2012 from 78.5% in 3QFY2012. If the bank had not increased its provisioning coverage, PBT would have been higher by Rs97cr (38.4% yoy). The bank restructured ~Rs1,700cr of loans during the quarter (majorly Air India’s ~Rs1,000cr), taking its outstanding restructured advances to ~Rs6,200cr (~4.8% of the overall loan book).”
“The stock is currently trading at 0.5x FY2014E ABV (its five-year range of 0.6–1.1x and median of 0.8x). Also, valuations appear cheap compared to its peers, which are trading at higher multiples, although they have similar or poorer fundamentals. We value the stock at 0.7x FY2014E ABV and recommend Buy on the stock with a target price of Rs131,” says Angel Broking research report.     Public holding more than 90% in Indian cos    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 on the attachment

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