Stock analysis of Oriental Bank of Commerce (OBC) along with target price.
OBC has one of the widely spread networks in northern part of India. At the same time, bank is increasing its network in other parts of country as well. As in March 2010, OBC has a network of 1,508 branches and it has plans to add 175 branches by march 2011.
OBC is a public sector bank with market capitalization of Rs. 8821 crores as on date. One of the important factor for profitability of a banking sector stock is it's net interest margin i.e NIM. It is basically difference between the interest rate at which bank accepts deposits from customers and interest rate at which bank disburses loans. OBC bank's NIM was around 3.3% for last 3 quarters which is not bad. But going forward, with interest rates increasing every few months, NIM might get affected.
During the period FY06-FY10, advances and deposits grew at a CAGR of 20% and 19% respectively. The management is expecting 22%-23% business growth in FY11.
Another important criteria for evaluation of bank's performance is it's Non Performing Assets i.e. NPA. OBC's NPA stands below 1% which is good for bank.
At the P/E ratio of 6.45 at current stock price, OBC is certainly at attractive stock valuation level compared to it's peers from banking sector. Price to book value ratio stands at 1.2 which is very good. Dividend yield for OBC is at 2.58% which makes it one of the good dividend yielding stocks from banking sector.
Looking at growth expected and stock valuations, at current stock price of Rs. 352, OBC is available at attractive level and one may buy stocks at any dips/current price for medium term to long term investment. Medium term target could be Rs. 410-415.
