Shares of Bank of Baroda hit their fresh 52-week high of ₹168.65 on BSE on November 11. However, it witnessed profit booking after that and ended 2.24% lower at ₹161.75.
The stock has been on a roll this year. As of November 11 close, the stock is up 97% year-to-date (YTD).
The public sector lender's September quarter results beat estimates with double-digit growth in profitability.
As Mint reported, its standalone net profit stood at ₹3,312.42 crore in Q2FY23, up 58.70% from a profit of ₹2,087.85 crore posted in the same quarter of the previous fiscal.
The bank's provision's declined, while asset quality improved sharply. The organic retail loan portfolio of the bank saw healthy growth with a strong performance in the personal loan book.
Net interest income (NII) came in at ₹10,174.46 crore in Q2FY23, up 34.47% from ₹7,565.97 crore in Q2FY22.
We talked to analysts to understand if the stock has more steam left. Here's what fundamental and technical analysts said about the stock.
Fundamental views
Analyst: Asutosh Mishra, Head Of Research, Institutional Equity, Ashika Group
Public sector banks are witnessing a substantial change in the operating environment as for the first time after a long period, the banking system in India is witnessing double-digit credit growth.
Strong deposits franchise is one of the key strengths of public sector banks. Within public sector banks, Bank of Baroda (BoB) is considered to be the second-best franchise after SBI and thus getting increased investor attention.
BoB has delivered a strong performance in Q2FY23 and has been reporting consistent improvement in all major operating, financial, and asset quality matrices.
The bank is still relatively attractively valued despite a sharp run and thus investors are finding good risk rewards.
Analyst: Abhishek Jain, Head of Research, Arihant Capital
Bank of Baroda posted the second quarter numbers much ahead of market estimates, leading to a stock rally.
Net interest margins (NIMs) were higher by 31 bps quarter-on-quarter (QoQ), loan growth was higher by 19% on a year-on-year (YoY) basis, and credit cost was lower than market expectations at 80 bps.
The net slippage number was a key determinant that was negative for the quarter at - 0.4%. The restructured books were also down by 30 bps QoQ.
They have achieved their FY24 target return on assets (RoA) of 1% in this quarter itself, and they have given conservative guidance (of 1-1.25% credit cost) which based on the current trend we believe that the stock will do relatively better.
On a cumulative basis, we estimate that next year the RoA will cross 1%.
Rate hike trends generally did well for NIMs, which we have seen for this company also. The pre-provisioning operating profit was higher by 44% despite a high opex of 9%, so they are getting operating leverage on the stock.
The stock, in the short term, can touch ₹190 target, where it will be trading at 0.8 times BV. Short-term momentums are positive at this point in time. Let the stock cool down and after that one can accumulate it at lower levels.
Technical views
Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has recently given a breakout above ₹152 and reached the 52-week high of ₹168 which can extend further to ₹175 where it can witness resistance.
A decisive move past the ₹175 level would further strengthen the trend where new targets of ₹193-195 levels can be expected.
The indicators have reached the overbought zone and chances of some profit booking in the coming days cannot be ruled out. Only a decisive move below ₹150 would weaken the bias and then one can think of selling their holding.
Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers
For the last two years, Bank of Baroda has given a whopping nearly 380% return. At the current juncture, it is approaching its crucial historical resistance zone of ₹175-180 which is also 0.886 retracements (one of the reliable ratios in the harmonic arsenal) of the previous downswing on a monthly scale.
Also, volume is dropping as price increases, which is an anomaly with respect to volume price analysis (refer to the chart given below).
On the Indicator front, the monthly MACD is overstretched which is a sign of early caution. One can book some profits at the current and other higher levels (i.e. ₹175) if achieved. Fresh buying as of now is not advised.
According to a MintGenie poll, an average of 32 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
