As part of its Diwali stock picks for Samvat 2081, HDFC Securities has recommended Bank of India (BoI) with a target price of ₹132, offering a potential upside of 25% from its current market price of ₹105. Investors are advised to buy within the range of ₹96 to ₹106 and hold till the next Diwali.
Bank of India, the sixth-largest public sector bank in India, achieved robust business performance in Q1 FY25 with a 12% year-on-year (YoY) growth in total business. The bank is focusing on expanding its RAM (Retail, Agriculture, MSME) portfolio, which showed impressive growth—retail advances increased by 20%, agriculture loans grew by 22.2%, and MSME loans by 16.1% YoY. The credit-deposit ratio also improved by 412 basis points YoY to 78.53%.
Valuation and Recommendation
Bank of India boasts strong capital adequacy, improved Net Interest Margins (NIMs), and enhanced asset quality, demonstrated by lower gross and net non-performing assets (GNPA & NNPA). The bank is trading at a price-to-book ratio (P/B) of 0.6x FY26E ABV, making it an attractive entry point. HDFC Securities expects the stock’s valuation to improve due to its solid financials and positive outlook. Investors are recommended to buy within the ₹96-106 range for a target of ₹132.
Key Financials (FY22-FY26E):
- Net Interest Income (NII): ₹14,062 crore (FY22) to ₹35,108 crore (FY26E)
- Pre-Provision Operating Profit (PPOP): ₹9,711 crore (FY22) to ₹20,049 crore (FY26E)
- Profit After Tax (PAT): ₹3,330 crore (FY22) to ₹9,553 crore (FY26E)
- Earnings Per Share (EPS): ₹8.3 (FY22) to ₹20.9 (FY26E)
- Return on Assets (ROAA): 0.4% (FY22) to 1.0% (FY26E)
- Return on Equity (ROAE): 7.5% (FY22) to 11.1% (FY26E)
Key Concerns
- Potential deterioration in asset quality in the agriculture and SME segments due to economic or weather-related factors.
- Lower-than-expected resolution of stressed assets could affect profitability.
- The implementation of the Old Pension Scheme (OPS) for employees currently on the New Pension Scheme (NPS) could pose a material risk.
Bank of India’s strong capital position, focus on RAM lending, and improving financial metrics position it for substantial growth over the next year.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from HDFC Securities and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
