Note on City union bank
Currently its at 1.3ish Book value due to the npa divergence as seen by rbi and the next 2 quarters being no growth as per management. As i see it is… the divergence is basically due to 13 clients. Management says some of these clients will pay back and also due to restructuring atleast 40 to 50 percent should clear. So about 130 crores will disappear. Also, the management team would know these clients better than anyone… and if they can help a couple of them through this tough period they ll get a couple of good high loan clients out of this in the long term. This should get settled over 2 quarters and considering other provisioning too i can see their profits falling to near 150 range next 2 quarters. This isnt an issue since their book value wont get hurt and growth should kick in by 2nd half fy 24 since they are at low leverage at the moment. The major issue is will this continue to be repeated in the future. Personally i feel this would be a tipping point for management to go even further into digitization and reporting npas and it may turn out to be a good thing long term. When 13 to 14 percent book growth kicks in(and maybe even more when leverage hits 13 to 14x) then this would be forgotten.
Its still a small bank and has a long way to go so don’t see growth being an issue for years to come… atleast for the 5 year period i have planned for it(betting on book value being above cmp in 3 years and hopefully above median or above median PB of 2.4 to 3 over 5 years…). Theyve proved they can handle down cycles well too and at current valuations even if things go wrong over the next 5 years i doubt il lose anything here vs an fd.
With that being said ive closed another few fds and hiked my stake here to 7 percent of my PF. Im so desperate to add cash that i even took out my “learning experience” tracking position in rkec and added it here even though it barely moved the numbers.
Currently have 15 stocks in my PF… in order of weightage at present values they are
Laurus labs
Idfc + Idfc first
Hbl power
Intellect design arena
Dynemic products
City union bank
Jubilant ingrevia
Ugro capital
(Above accounting for 77 percent)
Everest kanto
Wpil
Indigo paints
Krsnaa diagnostics
(Above 4 accounting for 18 percent)
And a total of 5 percent all combined(ie less than 2 percent in each) in:
Valiant Organics
Orbit exports
DLink
Pretty happy with the above and ive reached breaking point regards tracking the above so in the future il only add companies if i sell one of the above or increase stakes in the above 15
Disc: Not a sebi advisor
| Subscribe To Our Free Newsletter |
