Reducing Target Price to PKR 179.30
We have reduced our June 2019 target price on Habib Bank Limited (HBL) to PKR 179.30 from our earlier TP of PKR 230.80. Our new target price implies a 24% upside from HBL’s last closing price, hence we are maintaining a positive stance on the stock. The major reason why our target price has declined is that HBL has missed our earnings expectations for two quarters due to a significant hike in its administrative expenses. We now expect these expenses to remain higher for a longer period of time than we previously expected, which has reduced our earnings and book value estimates for CY18 and CY19. Consequently, our target price has also declined. The Bank carries high risk in that its administrative expenses could remain elevated for a longer period of time and its New York operations could result in further settlement. Therefore, we advise investors to consider this stock based on their respective risk appetites.
Habib Bank Limited is engaged in commercial banking and asset management related services in Pakistan and overseas. The Bank's segments include Branch Banking, which consists of loans, deposits and other banking services to agriculture, consumer, small and medium-sized enterprise (SME), and commercial customers; Corporate Banking, which consists of lending for project finance, trade finance and working capital to corporate customers and it also provides investment banking services, including services provided in connection with mergers and acquisitions; Treasury, which consists of trading, fixed income, equity, derivatives and foreign exchange businesses, and it also includes credit, lending and funding activities with professional market counterparties; International Banking, which is engaged in monitoring and reporting purposes and consists of its operations outside of Pakistan, and Head Office/Others. It operates in Pakistan; Europe, Middle East and America, and Asia and Africa.
Ismail Iqbal Securities (Private) Limited (IISPL) is a TREC holder of the Pakistan Stock Exchange, as well as an SECP registered Underwriter and Book Runner. IISPL provides comprehensive financial services including Equity Sales, Research on Equities and the Macro-Economy, Investment Advisory, Portfolio Management, Corporate Finance, and extensive services for Private Equity investors. IISPL services a diversified client base, from Institutional to Retail Investors including High Net worth Individuals.
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