Following Punjab National Bank's positive disclosures for the September quarter, brokerage house JP Morgan has upgraded the stock's rating to 'overweight' from 'underweight' and raised the target price to ₹72 (from ₹34), a 28 percent potential upside.
The Q2FY23 disclosures of the public sector bank revealed that its net slippages have entered the negative territory, recovery momentum is outpacing the creation of new non-performing loans (NPLs), and there is little stress in corporate loans.
The brokerage in its report said that the provisions are largely related to back book, which are higher than those of State Bank of India/Bank of Baroda, and the market will likely look through it via a one-time book value adjustment.
"The stock has seen a re-rating led outperformance recently (+44% in 3M vs. NSEBANK: +8%) and we believe that, with limited new stress formation and system growth outlook improving, this trend could continue in the near term," added the brokerage.
The brokerage anticipates that the profitability will continue to be under pressure in F23/24 as the company catches up on back book provisioning.
"This keeps our F24 estimate broadly unchanged. However, with limited new stress formation, and system growth itself picking up, we see further scope of re-rating at Punjab National Bank," said the brokerage in its report.
On the Monday's intraday trade, the public sector bank's stock was near its 52-week high levels. At 13:12 IST, the stock was trading 2.67 percent higher at ₹57.75 per share on the BSE.
It has gained 104.63 percent from 52-week low of ₹28.0.
The stock price outperformed its sector by 31.21 percent in the past year, according to trendlyne.
Analysts believe the short term trend for the stock will be positive with support around ₹52 level.
According to Mintgenie poll, 17 analysts on average recommend 'sell' rating for the stock.