Patria yesterday restored full coverage of Ceska sporitelna with a long-term buy recommendation and a 12-month target price of CZK 283. At yesterday’s close of CZK 252.80 per share, the stock is trading at a 12% discount to our target price, which has been derived as the midpoint of our target 2002E PBV range of 1.40-1.55x. For 2002, our forecasts suggest that the improving operating profitability and the return to a standard level of provisioning will deliver an ROE of 17.5%, which is close to the bank’s target of 18%.
Our short-term recommendation is hold, as the current 2001 PBV multiple of 1.57x does not look attractive given the 6% ROE expected this year (and Q1 2001 results indicate that the bank is on track in delivering this 2001 target), suggesting a limited short-term upside potential. In fact, the recent price gains may lead to short-term stagnation or a modest correction.
(Jan Hájek)