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Nov 05, 2012, 09.47 AM IST | Source: Moneycontrol.com

Accumulate Union Bank; target of Rs 236: Dolat Capital

Dolat Capital is bullish on Union Bank of India and has recommended accumulate rating on the stock with a target of Rs 236 in its November 5, 2012 research report.

Dolat Capital is bullish on Union Bank of India  and has recommended accumulate rating on the stock with a target of Rs 236 in its November 5, 2012 research report.

“Union Bank of India’s (UBI) reported quarterly result better than our expectations on the back robust improvement in asset quality, healthy core fee income and stability in margin. Sharp fall in gross slippages and strong recoveries/ upgradtions improved NPL levels significantly. Also, higher NPL provisions runrate further increased buffer level with higher provision coverage. Sustainability in asset quality would key stock price catalyst; the bank’s management avoided to indicate any targets on the same.”

“UBI recorded NII of Rs 18.5bn (11% Y/Y and 2% Q/Q), 2.5% higher than our estimates; margin remained flat on Q/Q basis at 302bps. Non-interest income was also above our estimates mainly on the back of healthy core fee income and strong cash recoveries. Operating profit was at Rs 12.7bn (5.6% Y/Y and 0.4% Q/Q), 3.7% above our estimates. Huge positive surprise on asset quality front led to deviation on bottomline level; the bank’s recorded net profit of Rs 5.5bn (57% Y/Y and 8.4% Q/Q). Overall, the bank reported an impressive set of numbers.”

“We raise our earning estimates for FY13/FY14 by 32%/35% respectively on the back of huge improvement in asset quality, stable margin and healthy core fee income. We increase our target price by 44% to Rs 236 at 0.96x ABV FY14. We upgrade the stock rating to accumulate (from previous Sell rating). With moderate credit book expansion, the bank could witness only marginal drift in margin in H2 FY13. Sustainability in asset quality would be the key determinant of future stock price movement,” says Dolat Capital research report.

Institutional holding more than 40% in Indian cos  

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