Buy Union Bk of India, tgt Rs 230: Emkay

Emkay research has maintained buy rating on Union Bank of India with target price of Rs 230 in its May 08, 2008 research report. "Union Bank of India’s (UBI) operating performance for Q4FY08 was disappointing The NII adjusted for extraordinary income has remained flat at Rs7.4 billion. The pressure on margins was severe as they dipped by 47bps yoy and 36bps sequentially driven by sharp increase in cost of funds. The other income at Rs3.1 billion (up 28.5% yoy) mainly driven by higher treasury gains and recoveries. The reported net profit at Rs5.2billion, was far ahead of our expectations driven by employee cost write back and lower tax provisions. The CASA mix has improved by 180bps yoy as well as sequentially driven by slower growth of 16% in the total deposits. We have lowered our estimates for both FY09E and FY10E by 8% each to take into account near term pressure on the margins . We have also lowered our price target on the stock downward to Rs230 from Rs240 earlier). The stock is currently trading at 1.1x FY10E ABV and 5.5x FY10E FDPER. We maintain our BUY recommendation on the stock" according to Emkay research report.

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