Multibagger: Union Bank of India shares up 300% in 5 years; can rally accelerate after Q2 results? What Systematix say
A Ksheerasagar
Domestic brokerage firm Systematix Institutional Equities has raised its target price on Union Bank of India to ₹215 per share while maintaining its ‘buy’ rating on the stock, after the state-owned bank reported results that exceeded brokerage estimates.
“We value the standalone bank at 1.1 times its FY28E adjusted book value per share of ₹196, based on a return on equity (RoE) profile of 16.2%, 15.8%, and 15.8% for FY27E, FY28E, and FY29E, respectively. Further, we assign a value of ₹4.3 per share to its subsidiaries,” the brokerage said.
Systematix Institutional Equities said Union Bank of India reported a standalone net profit of ₹5,540 crore in Q2FY27, 5.3% above its estimate, marking a 3.8% quarter-on-quarter and 30.3% year-on-year increase.
The growth was primarily driven by lower provisioning costs, which declined 28.5% sequentially and 49.8% annually, along with an improvement in net interest margin (NIM). NIM expanded by 6 basis points quarter-on-quarter and 19 basis points year-on-year to 2.86%.
Global gross advances grew 18.5% year-on-year, led by 22.4% growth in MSME advances, while deposits increased 6.9%. The slippage ratio improved by 12 basis points sequentially and 21 basis points annually to 0.7%.
Asset quality also strengthened, with the gross non-performing asset (GNPA) ratio declining by 23 basis points quarter-on-quarter and 87 basis points year-on-year to 2.42%, while the net non-performing asset (NNPA) ratio fell by 5 basis points sequentially and 13 basis points annually to 0.42%. The bank's return on assets (RoA) improved to 1.38%, while return on equity (RoE) stood at 17.2%.
Going forward, the management continues to prioritise current account and savings account (CASA) deposits and retail term deposits, focusing on improving average balances and maintaining a stable funding profile.
The management also expects the ongoing interest rate hike cycle to support further NIM expansion. It clarified that the total additional provisioning required for the expected credit loss (ECL) transition is around ₹5,500 crore, equivalent to 70 basis points of Common Equity Tier 1 (CET1) capital, and not ₹11,300 crore.
The shares have maintained a strong winning run in recent years, extending their gains by closing each of the last four calendar years in positive territory. From their 2020 low of ₹22.65, the shares have surged nearly 700% to trade at ₹180.70 apiece.
In terms of cumulative performance, the shares have gained 76% over the past three years and 300% over the past five years. Despite this stellar performance, the stock still trades around 60% below its record peak of ₹427, touched in 2010.
A Ksheerasagar
Ksheera Sagar has been working as a Market Research Analyst at LiveMint for the past four years, covering stocks, commodities, and broader financial markets. In this role, he closely tracks daily market movements, corporate earnings, sector trends, and macroeconomic developments. <br><br> He has over a decade of experience in the financial services industry and has previously worked with multiple organisations, including global investment bank J.P. Morgan, bringing strong research experience into the newsroom. <br><br> During his career, he has gained extensive exposure to equity research, market analysis, and financial data interpretation, strengthening his expertise across asset classes and market cycles. <br><br> He is known for his data-driven analysis and crisp, listicle-style market stories that break down complex financial developments across key markets for a wide audience. His strong research skills enable him to write detailed and insightful stories on stocks and sectors, focusing on the underlying factors driving market movements. <br><br> His work combines quantitative insights with clear storytelling, presenting financial developments in a clear and structured manner. Moreover, he enjoys writing multibagger and listicle-style copies. Outside of work, Ksheera enjoys playing the piano and exploring new places. He has a keen interest in travel, music, and continuously learning about global markets and economic trends.
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