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Stock Pick From The Banking Sector

| 6/28/2012 9:00 PM Thursday

Choice Scrip is a Blue Chip stock pick that is expected to give returns within a 6 months-1 year horizon. The recommendation is based on a fundamental analysis of the company.

The company recommended as the Choice Scrip for this issue is a leading banking company.

J&K Bank - Towering Performance

HERE IS WHY

  • It registered a resounding performance during the quarter and year ended March 2012, with the deposits up by (19 per cent) and advances up by (26 per cent).
  • It has among the best asset qualities in the industry, its net NPAs decreasing by five basis points to 0.15 per cent in FY12 YoY.
  • It is a high dividend yielding stock available at attractive valuations.

After the RBI maintained status quo with regard to the interest rates at its recent monetary meet, our selection of a banking company as the Choice Scrip of the fortnight could well be a surprise. Well, for one, the RBI retaining its key rates at the same level does not really have a negative impact on the banking space. Further, we at DSIJ, have been of the view that the worst is almost over for the sector. To ward off any concerns, we took a conservative approach and looked only at those banking stocks that have performed well in the recent past. Jammu & Kashmir Bank (J&K Bank) is one such entity that has performed well and is poised to grow well going ahead too. Its good asset quality, sustainable margins, good business growth and availability at an attractive valuation makes the scrip worth consideration.

BEST OF LAST ONE YEAR

Name of Company

Reco.

CMP(Rs)

Gain%

Ajanta Pharma

342.00

707.00

106.73

Asian Paints

2985.00

3763.00

26.06

Suprajit Engineering

19.80

23.50

18.69

FAG Bearings India

1261.00

1461.00

15.86

HSIL

133.00

152.00

14.29

Munjal Showa

71.50

80.00

11.89

Colgate Palmolive (I),

1014.00

1130.00

11.44

Bharat Petroleum

686.00

751.00

9.48

CMP as on June 26, 2012

Even in a volatile macro-environment, the bank has seen robust business growth that has been above the RBI’s projections. For FY2012, its deposits increased by 19 per cent (against the RBI’s projection of 15.5 per cent) to Rs 53346 crore, while the advances increased by 26 per cent (against the RBI’s projection of 16 per cent) to Rs 33077 crore. Most of the key parameters showed a robust performance, indicating that the bank is immune to the volatilities of an uncertain macro environment. Let’s take a look at the bank’s asset quality, which is a factor that has been hurting most of the banking companies. However, this has not been the case with J&K Bank, as its net NPAs actually decreased by five basis points to 0.15 per cent on a YoY basis and declined by one basis point on a sequential quarter basis.

 

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