MUMBAI: Kotak Securities has maintained its Buy rating on Punjab National Bank with a target price of Rs 617. A report released on August 22 said: "At the current market price of Rs 446, the stock is trading at 5.7x its FY10E earnings and 1.0x its FY10E ABV. We maintain our earning estimates and expect net profit for FY09E and FY10E to be Rs 22.05 bn and Rs 24.75 bn, respectively. This will result in an EPS of Rs 69.9 and Rs 78.5 for FY09E and FY10E, respectively. The ABV for FY09E and FY10E is forecast at Rs 396.9 and Rs 448.8, respectively. "At a RoE of 18.4% in FY10E, cost of equity of 14.5% and perpetual growth rate of
4%, the theoretical fair value stands at 1.37x its adjusted book value. Historically,
the stock has been trading in the range of 1.0x-1.75x ABV with the average around
1.28x. "PNB holds a 25% stake in UTI AMC, which is valued at Rs 10.3 bn (valued at 6% of
AUM of UTI AMC's FY09E AUM of Rs 686 bn) giving Rs 33 per share of PNB. Incorporating the unrealized gain of Rs 33 for 25% stake in the UTI AMC business, the fair value of PNB comes to Rs 617. "We are maintaining a BUY rating on the stock with a target price of Rs 617 based
on 1.30x its FY10E adjusted book value (assigning 75:25 weights to historical multiple and fair multiple based on single-stage Gordon Growth Model, respectively), which could provide 38% upside from current levels over a 12-month horizon." |
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