Buy State Bank Of Travancore with a target of Rs 800: Abhisek Sasmal

Abhisek Sasmal of Microsec Capital Ltd gives his views on State Bank o Travancore

The medium term trigger for State Bank of Travancore (SBT) is merger with its parent SBI. SBT is currently trading at 57% valuation discount to SBI which is at historic low level.

Apart from that, the return ratios are also healthy for this bank. Valuation is also inexpensive compared to its peers.

However, pressure on asset quality & growth slowdown can be a near term concern. Hence investors may have to bear near term pain as well.

We have used Residual Income Method & Comparable valuation technique for arriving at a weighted average target price of INR 800 for a time horizon of 18 months. Currently the stock is trading at a P/E x of 3.5 & P/BV x of 0.62 based on its FY13 expected earnings.