ICICI Securities’s recommendation to buy Bank of India (BOI) with a target price of Rs. 120, as outlined in their research report dated September 08, 2023.
Bank of India: A Positive Outlook
Bank of India (BOI) is showing promising signs of recovery, and ICICI Securities has expressed bullish sentiments on the stock based on their analysis.
Strong Cash Recoveries Expected
One of the key drivers of optimism is BOI’s management guidance for robust cash recoveries in FY24. They anticipate cash recoveries amounting to Rs. 12,000 crore, a significant increase from Rs. 7,233 crore in FY23. This positive development is expected to outpace slippages, primarily driven by the resolution of certain accounts under the National Company Law Tribunal (NCLT), particularly those in the power sector, and the implementation of the One Time Settlement Scheme (OTS).
Loan Growth Momentum
BOI is also poised to regain momentum in its loan growth. Sharekhan expects this growth to be led by a resurgence in credit to Micro, Small, and Medium Enterprises (MSMEs) and corporate sectors during the first nine months of FY24. The retail segment is also performing well, contributing to the positive outlook.
Valuation and Return Ratios
The research report suggests that as BOI’s return ratios improve in the coming quarters, valuations are likely to increase. This improvement is anticipated to stem from a rise in loan growth, stable margins, and a further reduction in credit costs.
Current Valuation
As of now, BOI’s stock trades at 0.7 times/0.6 times its Estimated Adjusted Book Value (ABV) for FY24E/25E.
ICICI Securities’s Recommendation
In light of these positive factors, ICICI Securities maintains a “Buy” rating on Bank of India and has revised their target price (PT) to Rs. 120.
In conclusion, Bank of India’s strong asset quality outlook, expected cash recoveries, and improved loan growth prospects are key factors that contribute to its favorable outlook. The “Buy” rating aligns with ICICI Securities’s confidence in the stock’s potential, and the target price of Rs. 120 suggests room for further growth.
