Buy Corporation Bank; target of Rs 449: Magnum

Magnum is bullish on Corporation Bank and has recommended buy rating on the stock with a target of Rs 449 in its August 29, 2012 research report.

“Corporation Bank has reported a flattish growth mainly due to increase in provision made by the bank in the Q1FY13. Results also disappointed with slippages at Rs 722 crore. Lower core‐tier I ratio at sub‐8% will warrant capital infusion going forward. At the CMP Rs 370, the stock is trading at attractive valuation 3.34x and 2.88x FY13E and FY14E earnings and at 0.57x and 0.52x P/ABV FY13E and FY14E respectively. We maintain our BUY recommendation with revised target price (TP) of Rs 449 (earlier target price Rs 478) valuing the stock at 0.7x FY13E Adj. BV of Rs 633 with an upside potential of 21% from the current levels.”

“During Q1FY13 of current financial year, the total income stood at Rs 3,978.23 crore in comparison with Rs 3,244.79 crore in Q1 of previous fiscal showing an increase of Rs 733.44 crore [+22.60%]. On comparison with Q1 of 2011‐12, the interest income increased by Rs 672.30 crore from Rs 2,978.32 crore to reach Rs 3,650.62 crore [+22.57%] during Q1 of 2012‐13. The Operating Profit of the Bank for the Quarter [Q1] ended June’12 was at Rs 669.86 crore as against Rs 553.19 crore for Q1FY13 of previous fiscal recording an increase of Rs 116.67 crore [+21.09%]. The Net profit of the Bank for the Quarter [Q1] ended June 12 increased to Rs 370.26 crore as against Rs 351.45 crore for Q1 of previous fiscal recording an increase of Rs 18.81crore [+5.35%].”

“Capital Adequacy Ratio under Basel II of the bank is at 12.92% as on June 30, 2012 as compared to 13% as on March 31, 2012 and 14.05% as compared to first quarter of FY11‐12. The Networth of the Bank stood at Rs 8,646 crore as at 30.06.2012 as compared to Rs 7,489 crore as at 30.06.2011. Corporation Bank has reported a flattish growth mainly due to higher provision made by the bank in the current quarter. At the CMP Rs 370, the stock is trading at attractive valuation 3.34x and 2.88x FY13E and FY14E earnings and at 0.57 xs and 0.52x P/ABV FY13E and FY14E respectively. We maintain our buy recommendation with revised target price (TP) of Rs 449 (earlier target price Rs 478) valuing the stock at 0.7x FY13E Adj. BV of Rs 633 with an upside potential of 21% from the current levels,” says Magnum research report.

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