Central Bank is one of those PSU bank which is very underrated even after the current rally from 43 to 73. Lets look at its peers and see what could be its reasonable or justifiable target.
Open the competition page here from money control.com
As you notice the book value of CB is 76. All the competitors of central bank are quoting at atleast 1.5 times the book value. Assuming the same, central bank should reach 120 to 150 in short period of time.
Note the PE of most other PSU bank is from 15 to 11, while that of CB is only 6. If we factor a conservative PE of 10, the price should be 116. At current market price of 69, it would be a appreciation of approx 50%.
Almost 80% of the shares are held by the govt, with fiscal deficit going up and financials reforms on the card, this bank my be the prime candidate for divestment. If that happens this stock will shot up.
My target of Central bank is around 150Rs by Dec 2009.
Holding source http://money.rediff.com/companies/central-bank-of-india/14030013/share-holding.
Disclaimer: I have stocks of central bank in my portfolio. Do your due diligence before buying any stocks.
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