Stock Pick From Banking Sector
1/24/2013 9:00 PM Thursday
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 Bank Of Maharashtra.
Bank Of Maharashtra - A Premium Asset
Here is Why:
- It is a consistently dividend paying company available at a fair valuation.
- Improvement is seen on the asset quality and margin front on a sequential basis, coupl d with a robust business growth.
- The government is likely to infuse around INR 800 crore in the bank, which will improve its Capital Adequacy Ratio (CAR).
Many a time, stocks of the fundamentally strongest companies fail to deliver on the returns front. This is typically because of a lack of triggers that can help in building the required momentum. The same logic applies in the reverse too. No matter how weak
|SHAREHOLDING PATTERN AS ON 31/12/2012|
|Promoters ||78.95 |
|Banks Fin. Inst. and Insurance ||10.84 |
|FIIs ||0.77 |
|Private Corporate Bodies ||1.24 |
|General Public ||7.8 |
|Others ||0.4 |
|Total ||100 |
a company is, some very strong triggers can take its stock to unexpected heights. Here is one stock from a sector that currently possesses both fundamental strength as well as a whole lot of triggers that can propel it up on the bourses.
With the Reserve Bank of India (RBI) expected to slash the interest rates in the March quarter of 2013, the banking space has been abuzz with activity. In CY2012, the BSE Bankex ended up 57 per cent, outperforming the Sensex, which appreciated by 26 per cent. We have been consistently bullish on the banking sector in particular, and the dynamics that our optimism is based on haven’t changed.
So, what are the factors that are prompting us to recommend the Bank of Maharashtra stock? The first is the sound quality of its assets. With the bank reporting robust growth in business, its Net Interest Margin too has been very strong and this adds to its fundamental strength. At the macro level too, there is a lot that goes in favour of this stock. The government has recently announced its intent of infusing capital to the tune of around INR 12500 crore in PSU banks. Of this BOM would be a beneficiary of around INR 800 crore.
Most public sector banks have been facing serious headwinds when it comes to asset quality. However, BOM stands apart in that it has seen an improvement in its Gross and Net NPAs. For the September 2012 quarter, its Gross and Net NPAs decreased by 24 and 9 basis points to 2 and 0.88 per cent respectively on a sequential quarter basis. This is indeed commendable. BOM’s Provision Coverage Ratio (PCR) stands at a strong 80.13 per cent, which signifies that it may not witness a major setback in terms of asset quality going ahead.
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