Markets
BSE See NSE See 39,360.61
247.87 (0.63%)
collapse Related Readings collapse

Stock Pick From The Banking Sector

| 12/13/2012 9:00 PM Thursday

Vijaya Bank - A Quality Asset

Low Priced Scrip is hidden gem, today's underdog, a stock with future potential that is expected to fetch returns within 1 year. This is a stock picked carefully based on a fundamental analysis of the company.

The company recommended as the Low Priced Scrip for this issue is from the banking sector.

Here Is Why: 

  • The bank is witnessing decent business growth, and has continued to maintain its current and savings account (CASA) ratio at around 21 per cent.
  • It has been a consistent dividend paying company with a dividend yield of around four per cent. 
  • The scrip is available at a trailing four quarter price-to-earnings multiple of 5.76x and a price-to-book value of merely 0.83x, and thus seems to be fairly priced.

With the government working aggressively on the reforms front, our economy looks all set to recover in the next year. The banking space would be one of the largest beneficiaries of this, and one can surely go  with the best performing banks in the space. However, investors should also look at banks that are emerging from trouble and have good prospects ahead. One such counter is Vijaya Bank. The bank has had a troubled past on account of asset quality issues and a declining bottomline. However, we believe that the negatives are almost priced in for the bank, and one may see a good upward move in the counter from here on.

SHAREHOLDING PATTERN AS ON 30/09/2012
PROMOTER'S HOLDING 55.02
Mutual Funds and UTI 1.04
Banks Fin. Inst. and Insurance 14.34
FII's 3.61
Private Corporate Bodies 4.32
Others 21.67
GRAND TOTAL 100
The bank is witnessing decent business growth. As on 30th September, 2012, its total business grew at a rate of 10 per cent to INR 144997 crore. Here, deposits grew by 9.5 per cent to INR 85194 crore and the total advances grew by 10.12 per cent to INR 59803 crore on a YoY basis. It has continued to maintain its current and savings account (CASA) ratio at  around 21 per cent. 

On the asset quality front, Vijaya Bank’s performance was not too different from that of the industry, and it faced strong headwinds. For the September 2012 quarter, its Gross and Net NPAs increased by 32 and 23 basis points to 3.17 and 1.9 per cent respectively on a sequential basis. Its Provision Coverage Ratio (PCR) stood at around 62 per cent. We believe that most of the banks are facing issues when it comes to maintaining asset quality. However, the impact of the same is already discounted in their respective scrip prices. 

LAST FIVE QUARTERS (Rs / Cr)

Sep ' 12Jun ' 12Mar ' 12Dec ' 11Sep ' 11
Sales 2,218.17 2,197.31 2,152.23 2,058.26 1,992.66
Other income 83.55 122.63 138.13 115.66 105.67
Total interest 1,768.21 1,742.26 1,659.68 1,583.66 1,479.31
Provisions Made 106.93 130.51 86.83 167.24 95.87
Total taxation -16.24 17 -4.32 10.23 40.34
Net profit / loss 123.37 111.36 180.97 124.27 203.53
Equity capital 495.54 495.54 495.54 472.67 472.67

Further, for the September 2012 quarter, the Net Interest Margin of the bank decreased marginally by four basis points to 2.1 per cent on a sequential basis. We expect an improvement on the NIM front in the coming quarters as the cost of funds declines. The Capital Adequacy Ratio (CAR) stood at 12.7 per cent, which is above the RBI’s minimum requirement of nine per cent, with the Tier 1 CAR standing at 9.54 per cent. We believe that Vijaya Bank has decent CAR at present. Hence, it would not be in a hurry for capital infusion from the government, unlike other PSU banks that would need funds urgently. 


Reco. pricePrice as
Name of CompanyPrice (Rs)11/12/2012Gain
Omkar Specialty Chemicals 58.50 120.00 105.13%
Granules India 102.30 174.00 70.09%
PTC India 45.00 74.50 65.56%
GIC Housing Finance 84.00 128.00 52.38%
Heidelberg Cement 36.30 55.00 51.52%
Umang Dairies 44.70 65.00 45.41%
Dena Bank 80.50 117.00 45.34%
IDBI Bank 81.00 110.00 35.80%
On a half yearly basis, the Net Interest Income (NII) of the bank saw de-growth by three per cent to INR 905 crore while  its net profits witnessed 15 per cent de-growth to touch INR 234 crore. This is mainly due to the bank paying a high interest expense, which does not allow its bottomline to expand. However, with the interest rates likely to soften around the March quarter of 2013, one may see an improvement in the bank’s margins and profits. Going ahead, the management aims to improve the core earnings by concentrating on CASA and retail loan products. 

Vijaya Bank has been a consistent dividend paying company with a dividend yield of around four per cent. On the valuations front, the bank is currently available at a trailing four quarter price-to-earnings multiple of 5.76x and a price-to-book value of merely 0.83x, and thus seems to be fairly priced. We believe that one can invest in the counter to garner better returns with a longterm view.

 

Find More Articles on: DSIJ Magazine, Low Priced Scrip, Stock Recommendations, Fundamental Picks, Product, Mid Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.