Buy Bank of Baroda; target of Rs 315 Prabhudas Lilladher

Prabhudas Lilladher's research report on Bank of Baroda

BOB saw a decent quarter as (1) core PPoP was higher owing to chunky TWO recovery of Rs25bn and (2) asset quality improved materially on account of reduction in GNPA by 38bps to 2.5% led by lower net slippages due to healthy recoveries. Lower NII/NIM and fees were offset by softer opex and adjusted for the TWO recovery, core PPoP was largely in-line. Due to a constrained deposit environment, the bank has cut its loan/deposit guidance for FY25E by 1% to 11- 13%/9-11%. NIM was a miss due to RBI circular of penal interest and fall in overseas NIM owing to repricing. Due to healthy recovery trends and higher write-offs, we trim GNPA for FY26/27E, but raise provisions by 3/5bps.

Outlook

Hence, core PAT reduces by ~2%, but ABV increases by ~3.7%. Stock is valued at 0.9/0.8x on FY26/27 ABV (20% discount to SBI). We tweak multiple to 1.1x from 1.2x, but increase TP to Rs315 from Rs300 as we roll forward to Sep’26 ABV. Retain ‘BUY’.

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