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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Turnaround round the corner
CHANGE
Initiate coverage with BUY rating and INR344 target price
Asset qu ality and pension issues restricted UBI from delivering on its
guidance in the past. However, with an improved balance sheet we expect
UBI to deliver strong earnings growth post 2QFY12E. We expect high
slippages in 2QFY12 due to transition to system based NPL. Valuations
remain extremely attractive for a 20% (FY12-13E) ROE bank.
CATALYST
Steady margins and higher recoveries in 2HFY12
UBI has scaled down its loan growth forecast to 19%, reduced term
deposits and mobilised savings deposits, thus we expect its CASA ratio to
improve both in absolute and % terms. Hence, margins to marginally
improve in the near term and then stabilise. Significantly lower slippages
and higher NPL recoveries in 2HFY12 could be a strong earnings driver.
VALUATION
Valuation discount unjustified, remains one of our top picks
UBI currently trades at 0.7x FY13E ABV (ROE of 20.4% over FY11-13E, 4%
dividend yield) below its long term average of 1.3x. Near term risks
remain from high slippages expected in 2QFY12 but we expect a
turnaround. Downside risks to our TP and estimates could arise from
higher than expected slippages in the SME and infrastructure segment.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Turnaround round the corner
CHANGE
Initiate coverage with BUY rating and INR344 target price
Asset qu ality and pension issues restricted UBI from delivering on its
guidance in the past. However, with an improved balance sheet we expect
UBI to deliver strong earnings growth post 2QFY12E. We expect high
slippages in 2QFY12 due to transition to system based NPL. Valuations
remain extremely attractive for a 20% (FY12-13E) ROE bank.
CATALYST
Steady margins and higher recoveries in 2HFY12
UBI has scaled down its loan growth forecast to 19%, reduced term
deposits and mobilised savings deposits, thus we expect its CASA ratio to
improve both in absolute and % terms. Hence, margins to marginally
improve in the near term and then stabilise. Significantly lower slippages
and higher NPL recoveries in 2HFY12 could be a strong earnings driver.
VALUATION
Valuation discount unjustified, remains one of our top picks
UBI currently trades at 0.7x FY13E ABV (ROE of 20.4% over FY11-13E, 4%
dividend yield) below its long term average of 1.3x. Near term risks
remain from high slippages expected in 2QFY12 but we expect a
turnaround. Downside risks to our TP and estimates could arise from
higher than expected slippages in the SME and infrastructure segment.
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