Buy Syndicate Bank; target of Rs 110: Magnum

Magnum is bullish on Syndicate Bank and has recommended buy rating on the stock with a target of Rs 110 in its August 22, 2012 research report.

“Syndicate Bank’s net interest income increased by Rs 209 crore from Rs 1,110 crore to Rs 1319 crore registering a growth of 18.83%. Non Interest Income (Other Income) for the quarter ended 30.06.2012 is at Rs 235.6 crore as against Rs 291.4 crore for the corresponding quarter of last year, registering a de‐growth of 19.2%. Operating Profit increased by Rs 98 crore from Rs 743 crore to Rs 841 crore registering a growth of 13.19%. Net Profit for the quarter ended June 2012 is Rs 440.2 crore as against Rs 342.9 crore for the same quarter last year, registering a growth of 28.4% largely due to negative tax expense in the first quarter of FY13. Yield on Advances has gone up from 10.19% in Q1FY12 to 10.73% for the quarter ended June 2012. The Bank has brought down its Cost to Income ratio to 45.90% in the first quarter of June 2012 from 47.03% during the same corresponding period of last year. Return on Assets (ROA) of the Bank increased to 0.99% as on 30th June 2012 from 0.90% as on 30th June 2011.”

“Global Business improved from Rs 243,436 crore in the first quarter of 2012 to Rs 286,447 crore in the first quarter of 2013 showing a growth rate of 17.67% (YoY basis). Global Deposits have grown up from Rs 132,889 crore to Rs 157,276 crore registering a growth of 18.35% (YoY basis). Global Advances have gone up from Rs 110,547 crore to Rs 129,171 crore registering a growth of 16.85% (YoY basis). Global Credit Deposit Ratio stands at 82.13%. Domestic Business has gone up from Rs 224,041 crore in Q1FY12 to Rs 257,715 crore in Q1FY13 registering a growth of 15.03% (YoY basis). Domestic Deposits have grown up from Rs 125,277 crore to Rs 145,283 crore registering a growth of 15.97% (YoY basis). Domestic Advances have gone up from Rs 98,764 crore to Rs 112,432 crore registering a growth of 13.84% (YoY basis). Savings Deposits has increased by 8.80% to Rs 34275 crores. Domestic CASA deposits increased by Rs 2,929 crore forming 30.44% share of total domestic deposits.”

“Syndicate Bank is expected to report sound earnings going forward considering the Asset Quality and slippages. Management is confident for cash recovery in the NPA category and we have raised our estimates by 4% for FY12‐13 and by 5% for FY13‐14. Overall, we maintain our positive stance on the stock and estimate that the bank would report RoA of around 1% and RoE of above 20% in FY12‐13. We reiterate our stock rating to BUY with a revised price target of Rs 110 (earlier target price of Rs 103). At CMP of Rs 97, the stock is trading at par valuation of PE of 3.34x of FY13E EPS and at an adjusted P/BV of 0.58x FY13E BV of Rs 167. We have valued the Bank at P/BV of 0.66x FY13E & maintain our buy rating on the stock,” says Magnum research report.

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