Buy UCO Bank; target of Rs 84: Magnum

Magnum is bullish on UCO Bank and has recommended buy rating on the stock with target of Rs 84 in its August 17, 2012 research report.

“UCO Bank, operating profit in Q1FY13 zoomed 27.6% to touch at Rs. 780 crore.  Net Profit rose by 23.9% to reach Rs. 362 crore.Total Business touched Rs. 2.74 lac Crore-a growth of 22.6%.Cost to income ratio was 38.85%. Maintain BUY recommendation with revised Target Price (TP) of Rs 84.00 (Earlier of Rs 84.00). During the quarter, the reported NIMs for the bank declined qoq basis to 2.4%. Higher slippages led to interest reversals, which resulted in lower sequential yield on advances for the bank. The management has guided for domestic NIMs to improve to 3.0% by FY13.”

“Total business as at the end of Jun'12 amounted to Rs. 274,173 crore as compared to Rs. 223,626 crore in Jun'11, exhibiting a growth of 22.6% on Y‐o‐Y basis. CASA deposits stood at Rs. 36,151 crore (25.60% of domestic deposit) as on Jun'12 against Rs. 30,841 crore a year ago registering a Y‐o‐Y growth of 17.2% aided by 48.1% rise in Current Deposits and 9.3% rise in Saving Deposits. Advances of the Bank at Rs. 119,163 crore at the end of Jun'12 grew by 24 % (YoY) from Rs. 96,092 crore at the end of Jun'11. Credit Deposit Ratio improved to 76.87% as at Jun'12 from 75.35 % in Jun'11.”

“Management expects a good growth in following sector like Agriculture, SME and Retail in coming quarters. Bank will be emphasizing more on Gold Loan advances and SME advances. Management is confident that Bank will maintain NIM around 3% levels for FY12‐13 and we have raised our estimates by 3% for FY12‐13. At CMP of Rs 70.00, the stock is trading at par valuation of PE of 3.21 xs of FY13E EPS and at an adjusted P/BV of 0.65x FY13E BV. We have valued the Bank at P/BV of 0.78x FY13E and maintain our BUY rating on the stock with a target price of Rs 84 with an upside potential of 20% from current levels,” says Magnum research report.

Public holding more than 90% in Indian cos

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