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Rakesh Jhunjhunwala portfolio: HDFC Securities give 'buy' tag to this bank share

Rakesh Jhunjhunwala portfolio: HDFC Securities is of the opinion that Canara Bank share price may go up to ₹228.50 per share levels in next two quarters. (Reuters) — Rakesh Jhunjhunwala portfolio: HDFC Securities is of the opinion that Canara Bank share price may go up to ₹228.50 per share levels in next two quarters. **(Reuters)**

3 min read . Updated: 19 Oct 2021, 02:08 PM IST Edited By Asit Manohar

This Rakesh Jhunjhunwala stock has delivered more than 25 per cent return to its shareholders in last one month

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Rakesh Jhunjhunwala portfolio: Canara Bank is one of the portfolio stocks that Big Bull added in July to September 2021 quarter. As per the shareholding pattern of Canara Bank for Q2FY22, Rakesh Jhunjhunwala holds 2,90,97,400 shares or 1.60 per cent stake in the PSU bank. In the last one month, this Rakesh Jhunjhunwala stock has delivered more than 25 per cent return to its shareholders. However, HDFC Securities see more gains in the banking stock. The brokerage is of the opinion that Canara Bank share price may go up to ₹228.50 per share levels in next two quarters.

According to HDFC Securities fundamental research report, post-amalgamation with Syndicate Bank, Canara Bank has become third largest public sector bank in terms of total business. With over a century of banking operations in the India, it has become an established player in the south region. Apart from banking, it also has presence across various financial services via Subsidiaries and JVs. The bank has well-balanced asset mix and it has started focusing on retail, agriculture and MSME sectors which will lead to better risk diversification, increased revenue and improved margins.

Canara bank has raised money via QIP in two tranches in the past one year; still it lags behind the peers. The CASA ratio, which remained below the industry average level, has started to improve with the amalgamation and management’s increased focus.

On earning of this Rakesh Jhunjhunwala holding company; HDFC Securities fundamental research report says, "The earnings profile of Canara Bank was severely impacted over the last few years primarily because of high credit costs; the same has seen an improvement in since FY21. The bank reported profit after tax (PAT) of ₹2558 crore during FY21, as compared to substantial losses incurred over the last couple of years (loss of ₹2236 crore reported for FY20)."

Expecting boost in loan business on fast approaching festival season; the brokerage said, "Going forward, we expect Canara Bank to grow its loan book at 8.5 per cent CAGR while NII and Net profit are expected to grow at 10.9 per cent and 72.1 per cent (due to lower base) CAGR respectively over FY21-23E. ROAA is estimated to improve to 0.6 per cent in FY23E from current 0.3 per cent in FY21 and RoE could rise to 10.8 per cent in FY23 from 5.2 per cent in FY21."

For the overall industry, with the arrival of the festive season, the credit growth is likely to improve in coming months, driven by retail and agriculture while industry and services continue to be slow. We expect healthy recoveries and upgrades in next two years. Asset quality trend of corporate and MSME would be the crucial monitorables.

On its suggestion to stock market investors in regard to Canara Bank shares; HDFC Securities report said, "We feel investors can buy Canara bank at last traded price and add more at ₹169 for the base case fair value of ₹216.5 and for the bull case fair value of ₹228.5 over the next two quarters."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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