Motilal Oswal Says Buy This Largecap PSU Banking Stock, Offering 4.41% Dividend Yield

Brokerage firm Motilal Oswal is suggesting buying the stock of Union Bank of India, for a like 14% return in the short term. The PSU bank is now offering a 4.41% dividend yield.

Stock To Buy: Target Price

The Current Market Price (CMP) of Union Bank of India is Rs. 42. Motilal Oswal has estimated a Target Price for the stock at Rs. 50. This stock has the potential to give 18% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 29,423 crore. In the last 6 months, this stock has surged by 13.25% on NSE.

Stock Outlook
Current Market Price (CMP)	Rs. 42
Target Price	Rs. 50
Potential 1 year return	18.00%
52 week high share price	Rs. 54.80
52 week low share price	Rs. 33.50

Financials

The company's net NII in FY22 was recorded at Rs. 277.9 bn, which is expected to reach at Rs. 2,251 bn in FY23. Their EBITDA in FY22 stood at Rs. 345 bn, which is expected to be at Rs. 412 bn in FY23. The company's adj. Profit before tax in FY22 was recorded at Rs. 306 bn, which is expected to be at Rs. 382 bn in FY23.

Stock Advantages: Motilal Oswal

Giving a buy rating to this stock, the brokerage firm said, "Total standard restructuring book stands at Rs. 167b, of which Rs. 45b appears to be stressed. MSMEs may witness some stress, but the same will not impact overall asset quality. Of the total restructuring book, accounts worth ~Rs. 32b, i.e. 17-18% has slipped into NPA. Within this book, SMA remains controlled at Rs. 20b. There remains good demand for NPA resolution in Steel, Infrastructure, and Power segments, which should see resolutions over the next few quarters."

Focus on the loan portfolio

The bank has segregated and shifted the loan portfolio to dedicated verticals, which focusses on marketing and general servicing. UNBK has opened 250 Retail loan points, 125 MSME loan points (loans up to Rs. 500m), mid-Corporate branches (disseminating loans in the Rs. 500m - Rs. 2.5b range), and 13 large Corporate branches (disseminating loans of over Rs. 2.5b) to primarily focus on specific loan segments. Stressed loans worth Rs. 2m and above goes to a dedicated vertical for a recovery and follow-up.

Further initiatives by the management

Top management of the bank highlighted the various initiatives undertaken by the bank to: a) improve the underwriting standards, b) increased focus on speedy and timely resolution of stressed assets, c) better monitoring of the SMA book, and, d) higher focus on recoveries, with a target to pare down the GNPA/NNPA ratio to less than 9%/2.9% by FY23, the firm said.

Company Portfolio:

Union Bank of India is one of the leading public sector banks of the country. The Bank is a listed entity and the Government of India holds 83.50% in the bank's total share capital. In 2020, Andhra Bank and Corporation Bank were amalgamated into Union Bank of India. Presently, it has a network of 8850+ domestic branches, 11200+ ATMs, 8216 BC Points serving over 120 million customers with 75000+ employees.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.