Buy Oriental Bank; target of Rs 274: Magnum

Magnum is bullish on Oriental Bank of Commerce (OBC) and has recommended buy rating on the stock with a target of Rs 274 in its August 22, 2012 research report.

“Oriental Bank, net interest income too grew by more than 10% to Rs 1,126 crore from Rs 1,018 crore during the same period. Non Interest Income (Other Income) for the quarter ended 30.06.2012 is at Rs 408.4 crore as against Rs 323.8 crore for the corresponding quarter of last year, registering a growth of 26.1%. Operating Profit increased by Rs 95.1 crore from Rs 801.4 crore to Rs 896.5 crore registering a growth of 11.9%. Oriental Bank of Commerce's net profit rose by 10.4% to Rs 391.4 crore in the quarter ended June 2012 as against Rs 354.7 crore in the same corresponding period last year. Yield on Advances has gone up from 11.62% in Q1FY12 to 12.38% for the quarter ended June 2012. The Bank has brought down its Cost to Income ratio to 41.57% in the first quarter of June 2012 from 46.6% in previous quarter.”

“Business improved from Rs 242,770 crore in the first quarter of 2012 to Rs 272,048 crore in the first quarter of 2013 showing a growth rate of 12.06% (YoY basis). Deposits have grown up from Rs 144,554 crore to Rs 158,152 crore registering a growth of 9.41% (YoY basis). Advances have gone up from Rs 98,216 crore to Rs 113,896 crore registering a growth of 15.96% (YoY basis). Savings Deposits has increased by 12.93% to Rs 28,091.60 crores. CD Ratio stands at 72.2% for the quarter ended June 2012. Capital Adequacy Ratio under Basel II of the bank is at 12.29% as on June 30, 2012 as compared to 12.69% as on March 31, 2012. Capital Adequacy Ratio slipped by 40 basis points to 12.29% in the first quarter of FY13.CRAR of the Bank is well above the minimum stipulated level of 9% by Reserve Bank of India.” 
 
“RoA is likely to remain at 1% over FY12/13, whereas core RoE should increase above 15% over in FY12‐13 led by increasing leverage and strong RoA. Management is confident that the Bank will be able to reach at 3% NIM margin by FY12‐13. However the Bank has set a internal target to bring down its GNPA levels to 2.80% from 2.97% and Net NPA levels to 1.75% from 2.05% by the financial year end 2012‐13. With the RBI guidelines laid down, Bank is optimistic that they will reach to a level of 70% to its Provisioning (PCR) by the year end. Owing to the concerns on Asset Quality and future of balance sheet expansion we revise our earnings estimates upward by 5% and 67% for FY13 and FY14 respectively. At the CMP Rs 233, the stock is trading at 4.6x and 3.9x FY13E and FY14E earnings, and at 0.57x and 0.51x P/ABV FY13E and FY14E respectively. We maintain our BUY recommendation with revised target price (TP) of Rs 274 (earlier target price Rs 263) valuing the stock at 0.67x FY13E Adj. BV of Rs 409 and upgrade our rating from neutral to buy with an upside potential of 18% from the current levels,” says Magnum research report.

Non-Institutions 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

Read More