Canara Bank share price dips 3% post Q4 numbers; Should you buy this Rekha Jhunjhunwala-backed stock?
Canara Bank’s stock price dipped sharply on Tuesday after its Q4 numbers. Overall, in the day, the stock has tumbled by nearly 4%.
However, brokerages still find the stock attractive and have recommended buying.
Brokerages believe the bank’s margins look stable and return ratios are improving steadily.
Nevertheless, they remain watchful of ECL provisioning.
Late market mogul Rakesh Jhunjhunwala’s wife Rekha is among the largest public shareholders of Canara Bank.
At the time of writing, on BSE, Canara’s stock price traded at ₹304.60 apiece down by 2.79%.
The stock has dipped by at least 3.7% with an intraday low of ₹301.85 apiece.
The stock has a market value of nearly ₹55,186 crore.
In Q4FY23, Canara Bank posted a net profit of ₹3,175 crore up by a whopping 90.63% YoY.
Net interest income zoomed by 23.01% YoY to ₹8,617 crore.
Net interest margin stood at 3.07%, also improving by 14 bps year-on-year.
Gross advances climbed by 16.41%, of which, gold loans jumped by 33.82% YoY, retail credit advanced 10.91% YoY, and housing loans surged by 14.27% YoY.
Overall, deposits were up by 6.52% YoY.
For the full-year FY23, the bank posted a five-digit net profit for the first time to the tune of ₹10,604 crore.
As of March 31, 2023, the bank’s gross NPA stood at 5.35% from 5.89% in Q3FY23 and 7.51% in Q4FY22.
Net NPA declined to 1.73% in Q4FY23 as against 1.96% in Q3FY23 and 2.65% in Q4FY22.
By the end of the March 2023 quarter, ace investor Rekha Jhunjhunwala holds 37,597,600 equity shares or 2.1% in Canara Bank.
As per Trendlyne data, her shareholding in Canara is currently valued at over ₹1,142 crore.
Should you buy this banking stock?
JM Financial in its report said, “We expect CBK’s earnings to be driven by a) healthy loan growth momentum, b) stability in margins, and c) lower credit costs leading to improvement on return metrics leading to RoA/RoE of 0.96%/18.5% by FY25e.”
On the stock price, JM Financial said ” Maintain BUY with revised TP of ₹371 (valuing the core bank at 0.8x FY25E BVPS).”
Further, Motilal Oswal in its note said, CBK reported a mixed performance as miss on operating performance was offset by higher ‘other income’ which drove earnings.
Margins stood broadly flat, while asset quality witnessed a steady improvement.
Loan growth was led by Corporate, Retail, and Agri segments and the outlook remains encouraging.
Slippages moderated sequentially, enabling further improvement in asset quality ratios.
The controlled SMA book, along with the declining restructuring book, provides additional assurance regarding asset quality.”
Motilal’s note added, “We revise our estimates slightly to factor in lower provisions and remain watchful of the provisioning requirement under the IND-AS.
We expect CBK to deliver FY25E RoA/RoE of 1.1%/17.8%. We reiterate our BUY rating with an unchanged TP of ₹400 (premised on 0.9x Sep’24E ABV).”
Meanwhile, Kotak Institutional Equities in its note said, “We maintain a BUY rating with FV of Rs370 (Rs340 earlier). We value the bank at 0.85X March 2025E adjusted book, with RoEs of 15-18% in the medium term.
The steady decline in slippages and healthy trend on bad debt recoveries gives us the confidence that the declining credit cost, along with high financial leverage, will continue to support Canara Bank’s return ratios in the medium term.”
As per Kotak, Canara’s business momentum seems strong as the bank is delivering healthy mid-teen growth. Operating profitability should hold up well during this period.
It added, “We see little reason to worry today due to the benign asset quality environment.
Accordingly, we have tweaked our estimates on credit cost and growth.”
Bylivemint
