Edelweiss Securities is bullish on Union Bank of India has recommended Hold rating on the stock with a target price of Rs 145 in its research report dated February 5, 2018.
Edelweiss Securities' research report on Union Bank of India
Union Bank of India (UNBK) reported Q3FY18 loss of INR12.5bn due to higher investment depreciation and elevated credit cost. Key highlights: a) slippages spiked to INR41.9bn (5.8%) with >65% being from other stressed classes; thus overall stress book (ex-NPLs) fell to 4.2% versus 5.7% in Q2FY18. The divergence was INR28.5bn, which has been fully recognised & provided for; and b) core revenue (ex-treasury) improved following higher loan growth (up >11% YoY) & better NIMs (funding cost benefit).
OutlookWe believe, dilution risk is imminent at weaker multiples, which will affect shareholders’ returns. While UNBK’s core operational performance did improve in Q3FY18, it has much ground to cover to catch up with sector averages. Moreover, asset quality pressure continues to be volatile. At CMP, the stock trades at 0.8x FY20E P/ABV. We maintain ‘HOLD/SP’ with TP of INR145.
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