Angel Broking recommends United Bank

Angel broking has put a Buy recommendation on United Bank with a price target of Rs 78.

“For 4QFY2012, United Bank of India (UBI) registered a moderate set of numbers. The company’s net profit grew by 4.2% yoy (down 33.9% qoq) to Rs 149cr, which was lower than our estimates due to higher margin
contraction and provisioning expenses than estimated by us. We recommend a buy rating on the stock.”

Angel Broking has said in its report that it believes the bank has several levers for structurally improving its RoA, but execution risks in terms of improving yields while maintaining the asset quality continue to remain an investment concern on the stock.

“That said, the bank is trading at inexpensive valuations of 0.4x FY2013E ABV (one of the lowest in the industry). The bank’s peers are trading at 0.6x-0.7x FY2014 ABV, in spite of having similar and in some cases much lower CASA
ratios. We value the stock at 0.6x FY2014E ABV and, hence, recommend a buy rating on the stock with a target price of 78,” the broking firm has stated.

Motilal Oswal recommends Larsen & Toubro

Motilal Oswal has put a buy rating on Larsen & Toubro with a price target of Rs 1,417.

“We expect standalone profits (net of dividend from subsidiaries) to remain flat over the next two years. Manufacturing JVs would have a negative impact on consolidated profits. Dividend income from subsidiaries was INR4.1b in FY12 (v/s INR2.3b in FY11); adjusted for this, standalone EPS for FY12 was INR67 (up 11%). We expect standalone EPS (net of dividend from subsidiaries) to remain flat at INR67/INR68 for FY13/14 v/s INR67 in FY12. Revenue would grow at a CAGR of 10% while EBITDA margin would decline by 72bp over FY12-14. We estimate consolidated EPS at INR87 (+12%, upgrade of 5%) for FY13 and at INR89 (+2%, downgrade of 4%) for FY14.”

The broking firm has said that there exist headwinds to consolidated numbers, given poor business visibility for manufacturing JVs like Power BTG, Shipbuilding and Forgings, and investment in BOT projects.

“Our estimates do not fully capture the possible impact of capacity under-utilization in the initial periods. Maintain Buy with an SOTP-based target price of INR1,417. We value LT standalone at 14x FY14E earnings and subsidiaries at INR428/share,” the firm has said.

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