Anand Rathi's research report on City Union Bank
City Union Bank reported a higher-than-estimated earnings growth in Q2, aided by a healthy 18.7% y/y credit growth and a strong 11.3% y/y growth in core PPoP. Key positives: (1) negative net slippages 70bps of loans, (2) 9bps sequential margin improvement in margin, (3) strong credit growth in core MSME segment, and (4) strong balance sheet. With likely higher credit growth than the system and modest credit cost, its earnings are expected to be healthy. Thus, we retain a BUY rating on the stock with a 12-mth TP of Rs295, valuing it at 1.7x P/BV on its FY28e book.
Outlook
Our TP of Rs295 TP, which stems from the two-stage DDM model, implies a ~1.7x P/BV on its FY28e book. Risks: Higher slippages and lower-than-expected loan growth.
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