ICICIDirect - Pick of the Week - Union Bank of India (Buy: Rs 93, Target: Rs 116)

Union Bank of India (UNIBAN)

Price: Rs 93 Target: Rs 116

Union Bank of India is witnessing robust growth in business supported by
rising non-interest income and a well-diversified loan portfolio.

At the current price of Rs 93, the stock trades at 4.5x its FY08E EPS of Rs
20.7. The bank is poised to sustain healthy earnings growth momentum and is
available at attractive valuations of 1x its FY08E ABV. We believe its RoA
at 0.9% and sustainable RoE at 19 -20% in FY08.

The bank a de-risked investment portfolio with 94% of SLR in HTM category
leading to lower future provisioning requirement on the same. Based on
theoretical P/BV multiple of 1.4x, we get a fair value of Rs 138 on FY08E.
However, considering current market conditions we expect the stock to trade
at 1.2x its FY08E ABV, giving us a target price of Rs 116, an upside of 25%
over a 9-12 month period.

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Thanks Manish