YES Bank, Union Bank, Arvind Fashions & Prince Pipes: Here’s what analysts say

Kotak Institutional Equities has increased the target price for YES Bank but still maintained its ‘sell’ call. Motilal Oswal Securities has revised its price target on Union Bank to Rs 100 apiece, citing healthy performance over the past few quarters. Nuvama Institutional Equities has also revised its target price on Prince Pipes after meeting the company management. Motilal Oswal Securities, meanwhile, has come out with a note on Arvind Fashions post its discussions with the management. It though offered no rating on the stock.

Union Bank | Motilal Oswal | But | Target Rs 100

Union Bank in its analyst meet highlighted various initiatives undertaken by the bank and the progress being made to improve the underwriting standards, focus on speedy and timely resolution of stressed assets, augment credit and deposits growth, and focus on improving the key operational parameters with an aspiration to deliver superior performance on a sustainable basis.

Motilal Oswal Securities said the bank expects the traction in loan growth to remain healthy driven by retail segment and improving trends in the corporate and SME segment. The re-pricing, especially on the MCLR book, along with a high mix of floating book is likely support the margins and is likely to remain in excess of 3 per cent for Q3 and Q4. Further, a low SMA book and controlled restructuring provides a better outlook on asset quality. Overall, the bank has maintained its credit cost guidance of 1.7 per cent for FY23 and aspires to reach a RoA of 1 per cent by FY25.

Motilal Oswal said has been reporting a healthy performance over the past few quarters with earnings driven by strong NII, expansion in margins, higher other income, and moderation in provisions.

“We estimate loans to grow at 12-13 per cent over FY23-24 with RoA/RoE at 0.8 per cent/13.9 per cent, respectively, by FY24. We reiterate our BUY rating with a revised target price of Rs 100, premised on 0.9 time Sep’24E adjusted book value,” it said.

YES Bank | Kotak Institutional Equities | Sell | Target Rs 16

Kotak Institutional Equities said it is surprised at the valuation at which YES Bank is trading and reiterated its negative view. The recent news flow pertains to closure/near closures of earlier announced transactions — sale of NPLs to the ARC and capital infusion, and not a fresh development. Although these are crucial milestones to achieve, Kotak said one perhaps need to see more than what we are able to see currently to justify these premium multiples. It has maintained Sell on YES Bank while increase its fair value for the stock to Rs 16 from Rs14 earlier.

Yes Bank is currently trading at a 10 per cent premium to IndusInd Bank, and at a 15 per cent discount to Axis Bank. “In our view, this appears to be unsustainable,” Kotak said. The bank, it said, needs to improve the liability franchise further, as the cost of funds differential with frontline banks is high. This requires significant investments and usually takes a much longer time. “Its loan book is targeting segments where there is no real advantage from their side. Consequently, we should expect YES Bank to deliver lower returns than the frontline banks,” it said.

Prince Pipes | Nuvama | Buy | Target Rs 754

Nuvama Institutional Equities said it interacted with Parag Chheda, Joint MD, and Nihar Chheda, VP – Strategy of the company. Key highlight was expectations that PVC prices may trend up in the near term driven by curtailment of global supply. The management was confident of healthy volume growth in H2FY23 led by healthy demand and channel re-stocking. Margins are expected to normalise from Q4FY23. Nuvama said the management focus continues to be on branding, distribution and innovation. Channel financing with recourse option may eliminate within three–four months, the Prince Pipes management told Nuvama. 

“Factoring in Prince Pipes’ strong growth and outlook, we are edging up FY24E and FY25E EPS by 3 per cent each, and the target to 33 times (from 30 times) in line with leader (Supreme). Maintain ‘BUY’ with a revised target of Rs 754. PPFL is in a sweet spot to gain from increased affordability and volume revival,” it said.

Arvind Fashions | Motilal Oswal | Not rated

Motilal Oswal said it recently hosted the management of Arvind Fashions, which was represented by Kulin Lalbhai (Promoter) and Shailesh Chaturvedi (MD & CEO). The discussion mainly revolved around business re-set undertaken in the last two to three years, including discontinuation of un-profitable brands, deleveraging, improving working capital management and management changes. It also revolved around the company’s three-year plans with focus on 10-12% revenue growth and achieving double-digit Ebitda margin over the next 18 months.

Motilal Oswal said the stock is currently trading at just 1.2 times on EV/sales for FY23 against 2–3 times for most apparel retailers. This may largely be attributable to the concerns around profitable growth for Arvind Fashion. However, owing to the recent measures taken by the company, Ebitda has reached 7.5 per cent (Pre INDAS 116) from its earlier loss.

“It took some initiatives to pare loss-making businesses, deleverage, and improve working capital management. Further, with the revenues expected to touch Rs 6,000 crore (10-12 per cent revenue growth guidance) and pre-Ind AS Ebitda margins guidance of 10 per cent, the stock is trading at 0.8 times EV/Sales and 7.7 times EV/Ebitda,” it said.

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