Updating his valuation for EQB Inc. to fall in line with multiple expansion of its peers, TD Securities’ Graham Ryding raised his target for its shares to $105 from $94, reiterating a “buy” recommendation. The average on the Street is $101.88.
“Since EQB’s Q4/F23 results (Dec. 7, 2023), P/E multiples for peers (Big-Six banks and regionals) have increased approximately 1.0 times,” he said. “EQB has moved up in similar fashion. This is likely due to the market putting a higher probability on the potential for interest-rate declines and a softer landing scenario. We are maintaining our estimates at this time. Given the multiple expansion for peers, we are moving our target price multiple higher for EQB (1.2-1.3 times 4QF BVPS [book value per share], up from 1.1-1.2 times previously).”
“In our view, more muted EPS growth in F2024 (vs. recent years) appears reasonable in the context of an environment that could reflect lower loan growth, flat to modestly declining NIMs, and higher PCLs. Nonetheless, EQB has a strong credit track record, and has consistently delivered solid earnings growth, ROE, and BVPS growth. Valuation at 7.7 times 4QF P/E is attractive, in our view, relative to its regional and Big-Six bank peers.”