Punjab National Bank Limited – Technofunda – Globe Capital
17-Nov-2021
Punjab National Bank Limited – Technofunda

At the CMP of Rs 39.50 the stock is trading at P/BV multiple of only 0.47 times with book value of Rs 81.56.

Overview and Recommendation

Brief:

The bank has done adequate provisioning for future. At the CMP of Rs 39.50 the stock is trading at P/BV multiple of only 0.47 times with book value of Rs 81.56.

Profile:

Punjab National Bank (PNB), India’s first Swadeshi Bank, commenced its operations on April 12, 1895 from Lahore, with an authorised capital of Rs 2 lac and working capital of Rs 20,000. The Bank was established by the spirit of nationalism and was the first bank purely managed by Indians with Indian Capital. During the long history of the Bank, 9 banks have been merged with PNB. As at the end of Marchr’2021, all branches of both eOBC and eUNI have been upgraded from Finacle 7 to Finacle 10 under CBS and are integrated with PNB to function as a single entity. More than 18 Crore Customers of the Bank are currently on the same platform.

Key Triggers:

Raised money through QIPs: Punjab National Bank has raised Rs. 1,800 crore by selling 53 crore shares on a private placement basis to investors like LIC and Societe Generale. Eligible Qualified Institutional Buyers (QIBs) were given the share at an issue price of Rs. 33.75 per unit. Societe Generale of France picked up 23.22% (12.3 crore shares) of the total share offering, followed by LIC which bought 22.2% (11.8 crore shares), and another French firm BNP Paribas garnered 13.3% (7.1 crore shares). Morgan Stanley Asia Fund 8.33% , Kuner India Fund and Segantii India Mauritius 5.56% each, while Vikasa India EIF secured 5% of the QIP.

Strong Distribution Networks: The Bank has strong distribution network in PAN India basis 10925 Domestic & 2 International Branches, 13914 ATMs & 12346 BCs.

Improved Asset Quality: Gross Non Performing Assets (GNPA) has declined to Rs. 94479 Crore as on Dec’20 from Rs. 96314 Crore as on Sep’20. Net Non Performing Assets (NNPA) has declined to Rs. 26598 Crore as on Dec’20 from Rs. 30920 Crore as on Sep’20. Provision Coverage Ratio (PCR) excluding TWO improved to 71.85% as on Dec’20 from 67.90% as on Sep’20 and 58.25% on Dec’19. Credit Cost stood at 2.05% in Dec’20.

CRAR as on December, 2020 improved to 13.88%. Out of which, Tier-I CRAR is 10.90%, CET-I is 10.12% and Tier-II CRAR is 2.98% as on Dec’20

Valuation & View:

The bank has done adequate provisioning for future. At the CMP of Rs 39.50 the stock is trading at P/BV multiple of only 0.47 times with book value of Rs 81.56.

Key Risk:

Any negative verdict of Supreme Court may dent profitability.

Technical View:

PNB witnessed a bullish breakout from the Inverted Head & Shoulder pattern on daily charts and it is also trading above its long term as well as short term moving averages on daily charts.

Considering the current chart patterns, we suggest traders to buy PNB as we are  expecting it to test 47 levels in near term.

Summary:

Considering both the factors fundamental & technical parameter, we recommend a ‘BUY’ in PNB at current level for the target price of Rs. 47 with close below stop loss of Rs. 35.50.

Disclosure

Globe Capital Market Limited (“GCML”) is a Stock Broker registered with BSE, NSE, USE and MSEI in all the major segments viz. Capital, F & O and CDS segments. GCML is also a Depository Participant and registered with both the Depositories viz. CDSL and NSDL. Further, GCML is a SEBI registered Portfolio Manager. GCML includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates.

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