Market Price Rs 91 (FV 1) Analyst : Janak Shah (M.B.A. Finance)
Market Cap Rs 5464 crs Date: 9th October 2015
Target : Rs 120 Time frame: 1 year
About the Company:
This bank was recommended on 30th August 2014 at Rs 44 from which it has doubled to the present levels. City Union Bank is a leading private sector bank. It is 111 years old and has an impressive range of products and services. The company has a market cap of 5400 crs plus. As it is a professionally run bank, there are chances it will find a good suitors as lot of reforms are taking place in banking sector. Moreover the banking sector is poised to outperform. It is one of the very well managed private sector banks.
The company has targeted to do business in all segments of banking operations. The company has all sorts of modern banking solutions and has over 481 branches and 1226 ATM’s. It is a professionally run bank. The bank is very quick in opening new branches and is constantly into innovation of new products. It provides a range of new as well as traditional products.
Being a professionally managed bank, NPA’s are under control. Net NPA’s stand in the region of 1.32%.
For the year ended year ending of FY 10, the company reported income of 954 crores and earned a profit of 152 crs. The EPS was over 4 per share. In FY 11, revenues were 1200 crs plus and EPS was in the region of 5.35. For year ended March 2012, the Revenues were 1600 crs plus and Net profit was in the region of 280 crs and EPS was 6.5 per share. In the year 2012-13, revenues were over 2188 crores and the net profit of Rs 322 crs and EPS stood at Rs 6.65 per share. For the year end 2014, the net profit was 347 crores and the EPS stood at Rs 6.7 per share. The year 2015 saw the EPS rise to nearly 6.9. For the first quarter of June 2015-16 the EPS posted was 1.87 per share. Deposits grew at 12%. Dividend declared this year is Re 1.1 per share.
Book value is nearly 41 per share.
Promoters hold about 0% , Fii’s hold about 37.05% of shares and domestic institutions hold 10% Rest is held by Indian public
Comparisions to Peers:
Basically most of the private sector banks will get a PE ranging from 15 to 20. As City Union Bank is a private sector bank, it can get good valuations. There is a possibility of City Union to be rerated and it might be able to get PE of 15.
The bank is expanding its branches and it might go up to 750 in the next 3 years. Also the bank is concentrating on fee based products. As the whole banking sector evolved, the whole industry is set to change for the better. Many banks will outperform, there will be mergers and acquisitions. Bigger ones will gobble up smaller ones. The ones which will fetch value are City Union bank, Federal bank, Karur Vysya bank, Lakshmi Vilas bank and South Indian Bank.
Key risks in the banking sector include NPA’s and some government policies but as of now City Union has very low NPA’s so not much of a concern.
The current rate of Rs 91 per share is tipped to touch 120 in the next 1 year.
( Disclosure: The analyst has no holdings in the company as on date of issue being published) Analyst ( Janak Shah ) is a sebi certified research analyst Registration No: INH000001717