Brokerages maintained their bullish stance on Bank of Baroda (BoB) after it posted an in-line January-March quarter (Q4FY24) performance. With both profit and net interest income (NII) growing by 2.3 percent year-on-year (YoY) in Q4, analysts view the stock's valuations as attractive for potential re-rating.

So far this year, shares of BoB surged over 10 percent, outpacing a 1.5 percent rise in the benchmark Nifty 50 index.

Steady Q4 Despite One-offs, Analysts Raise BoB's EPS Estimates

JPMorgan analysts, maintaining an 'overweight' rating on BoB, have raised the target price to Rs 340 per share, indicating a 33 percent upside from current levels. They highlighted that BoB's Q4 profit exceeded estimates despite additional wage revision impact, with net slippages remaining low at 45 basis points in the March-ended quarter.

Motilal Oswal analysts also reiterated a 'buy' call on BoB and kept the target price at Rs 300 per share, saying that the lender reported a steady quarter. "We raise our FY25/FY26 EPS estimates by 1.9 percent/2.8 percent to account for stable margin and contained provisions. We estimate FY26 RoA/RoE of 1.22 percent/17.3 percent," they said.

No stress is seen in BoB's asset quality

BoB's asset quality remains resilient, with gross non-performing assets (NPAs) at 2.92 percent in Q4FY24, down from 3.79 percent a year ago. Net NPAs stood at 0.68 percent, compared to 0.89 percent in the previous year.

Kotak Institutional Equities analysts noted that the bank's asset quality continues to hold up well, with FY24 slippages at 1.4 percent, not raising concerns about portfolio stress. They maintain an 'add' rating with a target price of Rs 280 per share.

Having said that, BoB's net interest margin contracted to 3.18 percent in Q4FY24 from 3.31 percent in the year-ago period due to the higher cost of funds. Conversely, it expanded by 17 bps on a sequential basis.

Going ahead, the management maintained margin guidance at 3.15 percent for FY25E, driven by slower growth in overseas loans and lower impact of

repricing of deposits as most of it is already repriced.

Operationally, total domestic deposits of BoB grew by 7.7 percent YoY in Q4FY24, while domestic advances climbed by 12 percent YoY. Moving forward, the management has guided for 12-14 percent growth in loans and 10-12 percent growth in deposits.

BoB's valuations attractive, stock's re-rating to continue

Valuation-wise, analysts at Morgan Stanley expect the stock recovery to continue given better valuations. The brokerage firm shared an 'equal-weight' rating on the counter and raised the target price to Rs 280 per share.

Besides, analysts at Nuvama believe that BoB was trading at a discount to SBI. "We believe the discount is justified given SBI’s lower LDR, better asset quality, and lower earnings volatility versus BoB. BoB’s LDR remains the highest among state banks," they said, sharing a 'hold' rating on the counter with Rs 255 per share as the target price.