ICICI Direct is bullish on Bank of Baroda has recommended buy rating on the stock with a target price of Rs 110 in its research report dated January 27, 2020.
ICICI Direct's research report on Bank of Baroda
Bank of Baroda (BoB) reported a subdued set of numbers as anticipated. The operational performance remained steady though a surge in provisions dented earnings. Fresh slippages surged to Rs 10387 crore, led by divergence of Rs 4509 crore and one large HFC with exposure of Rs 2000 crore. Such high slippage led to elevated credit cost at ~380 bps of advances and ~18 bps QoQ increase in GNPA to 10.43% (absolute GNPA at Rs 73140 crore). Exposure in accounts under NCLT 1 list is Rs 5780 crore and NCLT 2 list is Rs 6436 crore as on Q3FY20. Provision coverage under NCLT 1 and NCLT 2 list is 99.42% and 87.62%, respectively.
Factoring in higher-than-expected credit cost, we lower our earnings estimate by 50%, 30% for FY20E, FY21E, respectively. We rollover to FY22 and lower our target price to Rs 110 (earlier Rs 130) valuing the bank at 0.85 x FY22E ABV. With the recent correction in the stock price, we maintain our BUY recommendation.
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