One may buy Union Bank of India with a price target of Rs 129 keeping a stoploss at Rs 119. The last quarter numbers in Union Bank were pretty decent compared to some of its peers with gross non-performing assets (NPA) less than 3.5 percent and net NPA less than 2 percent. I believe the asset quality will remain stable even in this quarter. Earnings and valuations currently trading at 0.43 price to book on technical basis which is a deep discount to 0.8-0.9-0.10 price to book on our historical basis.
One may buy Aurobindo Pharma with a price target of Rs 224 keeping a stoploss at Rs 212. It is trending at huge discount compared to some of its peers at 7.7 lakh FY15 price to earnings multiple. Rationale behind the same being first the rupee depreciation, secondly they have chased the product mix and the generics pharmaceutical business has been doing considerable well in the US segment.
One may sell Reliance Infrastructure for a price target of Rs 406 keeping a stoploss at Rs 427. There has been a structural problem in Reliance Infra when one looks at the balance sheet and the working capital which is getting stretched. The reason being the recent projects are getting delayed because execution problem is there and commercialization of existing projects is also pending. Given the macro headwinds in the current scenario, it would be difficult for Reliance Infra to sustain its trading gains and it will be more of a sell on rallies kind of a stock.
One may sell Reliance Capital with a price target of Rs 340 keeping a stoploss at Rs 357. It has been not doing very well when it comes to the financial numbers and the operating leverage on which it operates because of the higher cost of the wholesale funds which has been there. Around 60-65 percent of the contribution comes on commercial finance business and the other financing arm. So I think the values or the gains which we see would be unsustainable for Reliance Capital.
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Buy Union Bank, Aurobindo Pharma; sell Rel Cap: Kant
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