Fw: Thematic Report (Switch from BoI to PNB)

 

 

Thematic Report [June 08, 2012]  Sharekhan www.sharekhan.com

Summary of Contents THEMATIC REPORT Switch from BoI to PNB  Anomaly in valuations among PSU banks: The entire basket of public sector banks (PSBs) has corrected significantly and rightly so, given the asset quality concerns and deterioration in the economic environment that would affect the growth of their core business. Yet some of the stocks have been beaten down excessively. Consequently, the situation has created an anomaly in the valuations leading to an opportunity for investors. The case in point is Bank of India (BoI) vs Punjab National Bank (PNB). For the past three years, BoI has traded at an average discount of 16% to PNB. However, after the Q4FY2012 results the situation has reversed and BoI is now trading at a 10% premium to PNB. In our view, this is an aberration driven by a sudden jump in the slippages and restructured accounts of PNB and a decline in the slippages of BoI in Q4FY2012. But the divergence in the performances is not sustainable and the anomaly in the valuations would get corrected going ahead. We, therefore, recommend investors to switch from BoI to PNB. We have a price target of Rs1,070 on PNB (1x FY2014 book value).   Click here to read report: Thematic Report Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.