by Equinomics Research & Advisory Pvt Ltd
The stock price of
State Bank of Bikaner & Jaipur (SBBJ) has fallen 16% from its 52 week high
of Rs.660 and currently trades at Rs. 556, which is 0.9x its FY2015 estimated
adjusted book value.
During FY2014, the
total business volume of the SBBJ has reached Rs 1.39 lakh crore and it had set
a target to grow by 13-14 % in FY2015. The fund raising plan comes against the
backdrop of this target - it is planning to raise around Rs. 500 crore to meet
its internal target for capital adequacy ratio (currently Tier I capital was at
9.04%).
Also during the year
FY2014, SBBJ bank opened 113 branches taking the total network to 1148
branches. Further, it plans to add 114 branches in FY2015. Equinomics expect
the NPA cycle for the PSU banks to reverse going forward which would be
favourable to SBBJ.
It scores better than
comparable bank like State Bank of Travancore (SBT) in terms of return on
assets - while ROA for SBBJ is 1.08 %, same is mere 0.29% for SBT in FY2014.
We firmly believe
that the merger of SBBJ with State Bank of India is an eventual possibility.
Considering the growth prospects, reversal of NPA cycle and the possibilities
of eventual merger of the bank with the SBI, we suggest our investors to accumulate
(with one year investment perspective) the stock at current price of Rs.556
with a target price of Rs.715 (which is around the expected one-year forward
Adjusted Book Value).
Disclosure: I,
G.Chokkalingam, do not hold any share in State Bank of Bikaner and Jaipur
directly or indirectly through any relatives, friends or proxies;
Mr.G.Chokkalingam
Founder & Managing Director
Equinomics Research & Advisory Pvt Ltd
18- 3/A, Ekta CHS, Shiv Dham Complex
(Opp to Oberoi Mall)
Filmcity Road, Malad (East)
Mumbai - 400 097
Ph: +91 22 28492942
chokka.g@equinomics.in
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