Buy Bank of Baroda target of Rs 100: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Bank of Baroda has recommended buy rating on the stock with a target price of Rs 100 in its research report dated May 31, 2021.

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Prabhudas Lilladher’s research report on Bank of Baroda

BOB reported loss of Rs10.5bn on DTA reversal from opting new tax regime, although PPOP was strong led by treasury/ recovery from write-off pool. Important highlight has been lower slippages at Rs30bn in Q4FY21 (adjusted to pro-forma), while restructuring also has been manageable of what has been envisaged in mid FY21. Incremental slippages to be much lower from corporate/international, while SME/Retail will be manageable. This will lead to lower provisioning requirement giving delta on return ratios with ROAs at 60- 70bps and further room from improvement in operations. Sub-optimal NIMs, SMA ratio at 3.5-4% and collection efficiency at 93% will act as risk to higher slippages than envisaged. Strong CASA, PCR of 67% and adequate capital act as catalyst for stock for reasonable valuations.

Outlook

Retain BUY with revised PT of Rs.100 (from Rs82) based on 0.7x (from 0.6x) FY23 ABV.

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