PNB Stocks: Stock price targets for Punjab National Bank after Q2 results

PSU Bank Punjab National Bank (PNB) saw its net profit exceed analyst expectations in the second quarter due to lower provisions. Asset quality improved and net interest income (NII) and operating profit before provisions (PPOP) came in healthy, in line with analyst estimates.

Given a strong improvement in return on assets (RoA), the bank has revised upward its RoA guidance for FY25 to around 0.9-1 percent from 0.8 percent earlier, with a number of brokers now rating PNB stock at Rs 120 per piece. The PSU bank stock closed at Rs 98.65 on Monday, up 2.97 percent.

“We have valued PNB at 26E ABV on September 1 and have derived a target price of Rs 120 from Rs 115 earlier. Our target price is at a premium of 58.2 per cent over the past five-year average; this reflects a CAGR of revenues of 34.7 percent over FY24-FY27E, driven by a 12 percent CAGR on loans, stable margins, improving operating ratios and lower credit costs,” said Nirmal Bang.

As the bank has exceeded its previous expectations and is heading for a better RoA, Nirmal Bang has turned bullish on the stock and earlier upgraded it from ‘Buy’ to ‘Hold’.

The state-run lender registered a 145 per cent increase in net profit at Rs 4,303.50 against Rs 1,756 crore year-on-year. NII rose 5.99 percent YoY from Rs 9,923 crore to Rs 10,517 Crore. Gross NPAs fell to 4.48 percent in the second quarter from 4.98 percent in the first quarter.

MOFSL said asset quality continued to surprise, with PNB seeing a healthy recovery and upgrades, resulting in an improvement in PCR of up to 90 percent.

SMA delinquencies (with loans of over Rs 5 crore) saw a marginal increase to 0.2 per cent of domestic loans, while recovery expectations are still at double the rate of slippages.

“It therefore led to the GNPA ratio falling to 3.5-3.75 percent (previous expectations of 4 percent), while credit costs were estimated at 0.25-0.3 percent (previous expectations of 0.5 percent). We increase our EPS estimates by 8.9 percent/4.9 percent for FY25/FY26, taking into account a sharp reduction in provisions,” MOFSL said.

The brokerage expects PNB to report RoA and RoE of 1 percent and 14.1 percent in FY26. MOFSL suggested a target of Rs 120 on the counter.