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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In a league of its own
CHANGE
Initiate coverage at BUY with a target price of INR941
Bank of Baroda (BoB) is the most improved PSU bank on all counts, and
we expect above-industry-average performance to continue. BoB has
historically traded at a premium to peers, but the bank’s valuations have
eroded in the current market correction despite earnings momentum and
performance being largely intact. We remain positive on BoB.
CATALYST
Improvement in macro and stability in Eurozone financial situation
BoB’s stock performance has mirrored the sector, although financials are
superior. Hence, the triggers largely are improvement in the domestic
macro scenario and global outlook on recession and Eurozone issues, as
20-25% of BoB’s business is driven by the UK, UAE and the US. We expect
earnings CAGR to remain healthy at 18.1% over FY11-13E.
VALUATION
Remains attractive for a bank which is outperforming peers
BoB trades at 1x FY13E ABV (with ROE of 21.5% over FY11-13E). The 5-
year average valuation is 1.2x, but the bank was re-rated during FY09-11
(average 1.4x), so comparatively valuations appear much more attractive
now. Downside risks to our TP and estimates are higher-than-expected
slippages from SME, infrastructure and overseas loan book.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
In a league of its own
CHANGE
Initiate coverage at BUY with a target price of INR941
Bank of Baroda (BoB) is the most improved PSU bank on all counts, and
we expect above-industry-average performance to continue. BoB has
historically traded at a premium to peers, but the bank’s valuations have
eroded in the current market correction despite earnings momentum and
performance being largely intact. We remain positive on BoB.
CATALYST
Improvement in macro and stability in Eurozone financial situation
BoB’s stock performance has mirrored the sector, although financials are
superior. Hence, the triggers largely are improvement in the domestic
macro scenario and global outlook on recession and Eurozone issues, as
20-25% of BoB’s business is driven by the UK, UAE and the US. We expect
earnings CAGR to remain healthy at 18.1% over FY11-13E.
VALUATION
Remains attractive for a bank which is outperforming peers
BoB trades at 1x FY13E ABV (with ROE of 21.5% over FY11-13E). The 5-
year average valuation is 1.2x, but the bank was re-rated during FY09-11
(average 1.4x), so comparatively valuations appear much more attractive
now. Downside risks to our TP and estimates are higher-than-expected
slippages from SME, infrastructure and overseas loan book.
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