MEBL target price maintained at Rs 196 per share

Akseer Research has just released an update on its coverage of Meezan Bank Limited (MEBL). The research house has maintained its Dec 24 MEBL target price to Rs. 196 per share. Here are the key points from the report:

MEBL’s 1QCY24 Results and Dividend Announcement

Meezan Bank (MEBL) held its conference call to discuss its 1QCY24 results and future outlook. The bank reported an unconsolidated EPS of PKR 14.2, marking a substantial 65% year-on-year increase. Alongside these results, MEBL announced an interim cash dividend of PKR 7.0 per share.

Financial Highlights

• MEBL’s net spread income increased by 65% year-on-year to PKR 67.6 billion in 1QCY24, driven by a higher underlying policy rate and increased average volume of earning assets.
• Non-funded income grew by 64% year-on-year to PKR 6.4 billion, mainly attributed to fee & commission income.
• Operating expenses rose to PKR 21.2 billion, up 42% year-on-year due to inflationary pressures and increased IT-related expenses.
• The bank’s capital adequacy ratio (CAR) improved to an all-time high of 24.1% in March 2024, well above the regulatory requirement.

Key Financial Ratios and Valuation

Key Financial Ratios

Ratio	CY21A	CY22A	CY23A	CY24E	CY25F	CY26F
EPS	17.4	25.1	47.2	54.2	47.2	46.2
DPS	5.6	8.2	20.0	26.8	27.5	27.8
BVPS	48.3	64.4	103.2	129.1	149.3	167.5
PER	12.6	8.7	4.7	4.1	4.6	4.8
Dividend Yield	2.6%	3.7%	9.1%	12.2%	12.5%	12.6%
P/B	4.5	3.4	2.1	1.7	1.5	1.3
ROE	38.8%	45.4%	58.3%	49.3%	35.6%	30.5%

Valuation Basis

The price target (PT) for Meezan Bank has been computed using the dividend discounting method, with a justified price-to-book (P/B) ratio. The research uses a sustainable return on equity (ROE) of 26% to calculate the exit P/B, considering a risk-free rate of 15%, beta of 1.0, and market risk premium of 6%.

Investment Thesis and Recommendation

The research house maintains a ‘Neutral’ stance on MEBL with a Dec-24 PT of PKR 196 per share. This represents a capital downside of 11%, while the stock offers an attractive dividend yield of 12%.

Company Description

Meezan Bank Limited is the largest Islamic commercial bank in Pakistan, operating since 2002. The bank is engaged in corporate, commercial, consumer, investment, and retail banking activities, with over 1,000 branches across the country.

Disclaimer

The information in this article is based on research by Akseer Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.