Rakesh Jhunjhunwala stock: 25% upside seen in Canara Bank shares on strong fundamentals; brokerage says this

Billionaire investor Rakesh Jhunjhunwala-backed Canara Bank shares’ have a potential to surge around 25 per cent according to the estimates from LKP Securities. The stock gained nearly 5 per cent on Thursday and was trading at Rs 222 apiece on the BSE on the intraday basis. 

According to LKP Securities, Canara Bank has been reporting consistent growth in net profit since last seven quarters. The bank has made provision worth Rs 5400 crore in Q4FY20 which will likely safeguard the balance sheet. 

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The bank’s margin (2.8 per cent in the Q3FY22) is in upward trajectory with continuous improvement in CD ratio. On the business front, bank is reporting stable credit growth (7 per cent sequential jump seen in previous quarter) across segments, the brokerage firm said.  

LKP Securities expect the credit cost to remain below 2 per cent for FY22 and FY23. Moreover, the bank has raised capital in FY21 which resulted in the CET -1 of 10.1 per cent (at par), and hence it believe the bank may raise capital from stake sales of AMC, HFC and Insurance.  

The brokerage also believes that the hurdles from merger (with Syndicate Bank) are behind and the bank shall witness gradual improvement in profitability. It recommends a Buy call given the FY23E ROA/ROE of 1/17 per cent inexpensive valuation (0.6x PBVPS).  

The ace investor Rakesh Jhunjhunwala has entered into stock since September quarter of FY22 and has picked 29,097,400 equity shares, which aggregates to 1.6 per cent stake in the public sector bank, as per the latest shareholding pattern of the company. 

The stock in the last 6 months has gained almost 41 per cent as compared to nearly 4 per cent decline in the S&P BSE Sensex. At around 10:36 am, it gained over 4 per cent to Rs 220 per share as against around 2.5 per cent rise in the S&P BSE Sensex.