Union Bank (I) (UNIONBANK)

FairStock Score: 81/100 — HIGH CONVICTION

Score breakdown: P/E: 3/3 · ROCE: 0/2 · Growth: 1/2 · Dividend: 1/1

Key Financials

Strengths

• Attractive valuation: P/E of 8.15 and P/B of 1.21 against a 16.64% ROE, with Graham Number ₹296.83 implying ~32% margin of safety.
• Strong growth: Sales up 26.94%, profit up 15.87%, and latest quarterly net profit of ₹5,073 Cr on revenues of ₹26,819 Cr.
• Financial health signals: Piotroski F-Score of 8/9 and positive free cash flow of ₹15,588 Cr.
• Sovereign backing: Government promoter holding of 74.76% provides stability and inherent support.

Concerns

• High leverage: Debt/equity of 11.77 is normal for a bank but amplifies asset-quality risk.
• Conventional metrics like Altman Z-Score of 0.37 and EV/EBITDA of 1721.90 are not meaningful for banks; bank-specific stress measures are needed.
• Government ownership can bring bureaucratic inefficiency, capital constraints, and politically influenced lending decisions.
• Growth may be cyclical such a sharp sales expansion could cool if the credit cycle turns.

AI Analysis

Let’s start with what I know. Union Bank sells at ₹179.71, just 1.21 times book value, while earning a healthy 16.64% return on equity. That is the kind of arithmetic Benjamin Graham would have approved of. The Graham Number—₹296.83—says there’s nearly 32% margin of safety, and the DCF estimate of ₹373.20, though I never trust one number blindly, reinforces the impression that the market is not paying for the bank’s growth. Sales have expanded 26.94% and profits 15.87%, with a latest quarter showing ₹26,819 Cr in revenues and ₹5,073 Cr in net profit. At 8.15 times earnings, the market is treating this as a suspicious cyclical bank. I understand that. PSU banks run on leverage—debt/equity of 11.77 would scare an industrial investor, and Altman Z and EV/EBITDA are not meaningful for banks. The Piotroski F-Score of 8/9 gives me confidence that the reported strength isn’t just top-line noise. The government’s 74.76% stake gives it a unique moat—call it sovereign backing—but also brings bureaucratic risk. The 2.35% dividend while growing is a nice touch. I wouldn't call this a permanent holding yet; I would call it a Fast Grower selling at a reasonable price, with the caveat that in banks, hidden bad loans are the enemy. I’ll monitor credit costs and capital ratios before making a full commitment.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer