Big Bull Portfolio: Motilal Oswal bullish on this stock, sees up to 40% upside

Big Bull Portfolio: Motilal Oswal bullish on this stock, sees up to 40% upside

Motilal Oswal has a 'Buy' rating on the stock, with a target price of Rs 270 per share. It says the bank reported 'healthy' earnings for 2Q FY22, supported by higher treasury gains and recovery from the DHFL resolution.

Shares of Canara Bank rose 5 per cent to hit an intraday high of Rs 203.65 on the BSE (Bombay Stock Exchange) a day after the bank posted its results for the quarter ended September 2021.

 

Canara Bank reported over two-fold jump in its net profit at Rs 1,332.61 crore in the second quarter ended September 2021. The bank posted a net profit of Rs 444.41 crore in the same period of the previous fiscal year. Total income stood at Rs 21,331.49 crore in the September-ended quarter against Rs 20,793.92 crore a year ago.

 

The stock ended 3.85 per cent higher at Rs 200.85 against the previous close of Rs 193.40 on BSE. With a market capitalisation of more than Rs 36,000 crore, the shares stand higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages. The large-cap stock has gained 128 per cent in the last one year and has risen 56 per cent since the beginning of this year.

 

Motilal Oswal has a 'Buy' rating on the stock, with a target price of Rs 270 per share. The research and broking firm believes the bank reported healthy earnings for 2Q FY22, supported by higher treasury gains and recovery from the DHFL resolution.

 

This recovery was predominantly utilised for making provision of Rs 3,200 crore towards one large corporate account (SREI Infra), and CBK now holds 50 per cent provision for this stressed account.

 

On the business front, the bank witnessed a decent sequential recovery in the growth of its Retail and Agri portfolios, while the weak trend in its corporate book continued.

 

Commenting on the asset quality, it said the bank's asset quality was largely stable despite higher slippages (SREI Infra) and was supported by higher recoveries and upgrades.

 

"We expect Canara Bank’s slippages to moderate as the corporate NPL cycle turns, driving a sustained reduction in its credit costs. We estimate RoA/RoE of 0.8%/13.6% by FY24E," it added.

 

India's ace investor and Dalal Street veteran, Rakesh Jhunjhunwala, also bought the shares of the state-owned Canara Bank, as the shareholding pattern of the lender for the September quarter shows on the BSE website. The filing shows Jhunjhunwala bought a 1.6 per cent stake or 2,90,97,400 shares of the bank.

This is a fresh investment by Jhunjhunwala, whose name was not there in the list of big shareholders in the previous shareholders' data. Like many other big investors, Jhunjhunwala is also bullish on state-owned banks.

 

Technical View

 

According to MarketsMojo, the bank has declared positive results for the last six consecutive quarters. The technical trend has improved from 'Mildly Bullish' on September 27, 2021, and the stock is technically in a 'Bullish' range now.

 

Multiple factors for the stock are 'Bullish' like MACD, Bollinger Band, KST and OBV. The stock is trading at a discount compared to its average historical valuations, and with a return on assets (ROA) of 0.3, it has an 'Attractive' valuation.