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HDFC Securities
Central Bank of India (Buy)
CMP: ₹101.45
Target: ₹123-139
CBOI is one of older banks established in 1911 and among the largest commercial PSU banks. It has the advantage of higher CASA and extensive branch network. Among PSU banks specifically we may see two positive deltas in the form of loan book growth and containment of asset quality once the macro conditions improve. The bank looks to be on the recovery path having earned profits consecutively during the last 3-4 quarters. There has been progressive growth in the level and quantum of profits — ₹62 crore, ₹162 crore in Q3 and Q4 last year and ₹192 crore in Q1. In Q2FY15, net profit was at ₹102.9 crore. Margins have improved with NIMs at 2.85 per cent as on Q2FY15.
Though we feel a full recovery is still to happen in terms of credit growth and NPA containment, we see a gradual improvement taking place in the performance of the bank in the last couple of quarters. We feel investors could look to buy the stock at CMP and average at band of ₹85- 93 (1.1x-1.2x FY16E PABV).
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