PNB shares: Stock price targets for Punjab National Bank post Q2 results

PSU bank Punjab National Bank (PNB) saw its Q2 net profit beating analyst estimates on lower provisioning. Its asset quality improved and that net interest income (NII) and pre-provision operating profit (PPOP) came in healthy, in line with analyst estimates.

Given a strong improvement in return on asset (RoA), the bank has revised its RoA guidance upward for FY25 to around 0.9-1 per cent from 0.8 per cent earlier, with a couple of brokerages now valuing the PNB stock at Rs 120 apiece. The PSU bank stock closed at Rs 98.65 on Monday, up 2.97 per cent.

"We have valued PNB at 1 time Sept’26E ABV and have derived a target price of Rs 120 from Rs 115 earlier. Our target multiple is at a 58.2 per cent premium to the past 5-year average multiple; this captures an earnings CAGR of 34.7 per cent over FY24-FY27E on the back of loan CAGR of 12 per cent, stable margins, improving opex ratios and lower credit costs," said Nirmal Bang.

Due to the bank surpassing its earlier guidance and being on the path to better RoAs, Nirmal Bang has turned positive on the stock, upgrading it to ‘Buy’ from ‘Hold’ earlier.

The state-owned lender logged a 145 per cent surge in net profit at Rs 4,303.50 against Rs 1,756 crore YoY. NII increased 5.99 per cent Yoy to Rs 10,517 Crore from Rs 9,923 crore. Gross NPAs fell to 4.48 per cent in Q2 from 4.98 per cent in Q1.

MOFSL said asset quality continued to surprise, with PNB seeing healthy recoveries and upgrades, resulting in the PCR improving to 90 per cent.

SMA overdue (with loans over Rs 5 crore) saw a marginal increase to 0.2 per cent of domestic loans, while the recovery guidance continues to be at 2 times of slippages.

"Thus, it guided the GNPA ratio to decline to 3.5-3.75 per cent (earlier guidance of 4 per cent), while credit cost is guided at 0.25-0.3 per cent (earlier guidance at 0.5 per cent). We raise our EPS estimates by 8.9 per cent/ 4.9 per cent for FY25/FY26, factoring in a sharp reduction in provisions," MOFSL said.

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