Buy City Union Bank, target price Rs 205: LKP Securities

LKP Securities has buy call on City Union Bank with a target price of Rs 205. The current market price of City Union Bank is Rs 149.85.

Time period given by analyst is one year when City Union Bank Ltd. price can reach defined target.

City Union Bank Ltd., incorporated in the year 1904, is a banking company (having a market cap of Rs 11074.94 Crore).

City Union Bank Ltd. key Products/Revenue Segments include Interest & Discount on Advances & Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2021.

Financials
For the quarter ended 30-06-2021, the company reported a Standalone Total Income of Rs 1193.08 Crore, up 6.39 % from last quarter Total Income of Rs 1121.43 Crore and down -1.39 % from last year same quarter Total Income of Rs 1209.95 Crore. The bank reported net profit after tax of Rs 172.99 Crore in latest quarter.

Investment Rationale
The brokerage expects the bank’s loan book to grow cautiously at CAGR of ~9% over FY21-23E, led by MSME and retail book growth. The bank’s credit cost will normalise by FY22E and estimate return ratio ROA/ROE of 1.3% and 11.5% in FY23E. It values CUB at 2.7xFY23E Adj. BVPS (Rs 76) and arrive at a target price of Rs 205. It recommends BUY with a potential upside of 37%.

Promoter/FII Holdings
Promoters held 0 per cent stake in the company as of March 31, 2021, while FIIs held 18.6 per cent, DIIs 38.5 per cent and public and others 43.9 per cent.