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Proven resilience
CHANGE
Initiate coverage at BUY with a TP of INR1,160
PNB ha s shown resilience to economic shocks by consistently delivering
higher ROE than peers. It has higher exposure to sensitive sectors
compared to peers, but its earnings robustness is also the best with NIM
at 3.85% and ROE at 20%+ as of 1QFY12. We believe valuations reflect
most of the negatives and the risk-return is favourable.
CATALYST
Margin performance and moderation in slippages
Strong earnings growth driven by higher margins has been the key reason
for PNB’s robust financials, enabling it to absorb various provisions. We
estimate NIM will moderate by 19bp y-y in FY12 and further by 15bp y-y
in FY13, but will remain best among its peers we cover. A potential
moderation in fresh slippages from 3QFY12 would be very positive.
VALUATION
Risk-return remains favourable at current valuations
The stock trades at 1.1x FY13E ABV (average ROE of 21.8% over FY11-13E),
which is below its long-term average multiple of 1.4x. We initiate
coverage with a BUY rating and probability-based TP of INR1,160.
Downside risks to our TP could arise from higher-than-expected slippages
in the SME, commercial real estate and infrastructure segments.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Proven resilience
CHANGE
Initiate coverage at BUY with a TP of INR1,160
PNB ha s shown resilience to economic shocks by consistently delivering
higher ROE than peers. It has higher exposure to sensitive sectors
compared to peers, but its earnings robustness is also the best with NIM
at 3.85% and ROE at 20%+ as of 1QFY12. We believe valuations reflect
most of the negatives and the risk-return is favourable.
CATALYST
Margin performance and moderation in slippages
Strong earnings growth driven by higher margins has been the key reason
for PNB’s robust financials, enabling it to absorb various provisions. We
estimate NIM will moderate by 19bp y-y in FY12 and further by 15bp y-y
in FY13, but will remain best among its peers we cover. A potential
moderation in fresh slippages from 3QFY12 would be very positive.
VALUATION
Risk-return remains favourable at current valuations
The stock trades at 1.1x FY13E ABV (average ROE of 21.8% over FY11-13E),
which is below its long-term average multiple of 1.4x. We initiate
coverage with a BUY rating and probability-based TP of INR1,160.
Downside risks to our TP could arise from higher-than-expected slippages
in the SME, commercial real estate and infrastructure segments.
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