Rakesh Jhunjhunwala stock: This public sector bank can yield 34% return - check target price

Brokerages are bullish on Rakesh Jhunjhunwala-backed Canara Bank stock on account of healthy first quarter earnings this fiscal. Billionaire investor Rakesh Jhunjhunwala, who is also termed as Big Bull of the Indian stock market, has stayed put in the public sector bank stock during June 2022 quarter. He holds 35,597,400 shares or 2 per cent equity in the bank, as per the latest shareholding pattern of the company as per BSE. 

Brokerages see an upside of up to 34 per cent in the stock price from the current price in the next 12 months.

The stock on Tuesday surged nearly 1 per cent to Rs 227 per share on the BSE intraday minutes in early trade. However, it surrendered the gains quickly to trade 1.5 per cent lower to Rs 221 apiece.

Canara Bank reported a steady operating performance supported by healthy loan growth and improvement in asset quality while NII growth was soft as margin contracted 15 basis points sequentially, Motilal Oswal said in its review report. 

However, management expects to recoup this as the benefit of the rising rate will flow through in the coming quarters, it said, adding that the loan growth was led by the corporate segment and the outlook for rest of the year is encouraging as the bank aspires for a 15 per cent growth in FY23.  

The brokerage estimates an RoA/RoE of 0.8/13.8 per cent, respectively, by FY24 and maintained a Buy rating with a target price of Rs 300 apiece, implying a 34 per cent upside (based on 0.8x FY24E ABV) 

While Kotak Institutional Equities retained ADD rating with an unchanged target price of Rs 260 per share. The brokerage value the bank at 0.8X March 2024E adjusted book with RoEs touching around 11 per cent in the medium term.  

It has adequate comfort on the bank’s outlook, especially given its performance over the past few years, and has done better than some of its PSU bank peers. However, macro concerns continue to weigh on midtier banks including Canara Bank, which may delay the valuation re-rating, it added.