Stocks to buy: Kotak Sec analyst bets on Union Bank, Apollo Hospitals

Stocks to buy: Recommendations by Shrikant Chouhan, head of equity research, Kotak Securities

Union Bank – Buy   

CMP: ₹139.9

 

FV: ₹170

 

Support: ₹135-130

 

Resistance: ₹155-160

 

Union Bank of India (UBI), the fifth-largest public sector bank in India with a global business mix of ₹22.1 trillion as of Q1FY26, continues to demonstrate strong operational stability and improving profitability. The bank operates through 8,649 branches and 8,976 ATMs with an international presence in Dubai, Sydney, and London. Supported by a workforce of over 74,000 employees, Union Bank has built a diversified and balanced lending portfolio. 

 

Retail, agriculture, and MSME loans together account for around 56 per cent of total advances, reflecting a strategic pivot toward granular, higher-margin segments. Within retail, housing loans form 42 per cent of the book, followed by vehicle and mortgage loans. MSME and agriculture lending comprise 15 per cent and 18 per cent of the portfolio, respectively, while corporate and infrastructure exposure continues to moderate, thereby lowering concentration and credit risk.

 

 

During Q1FY26, Union Bank reported gross advances of ₹9.74 trillion, up 7 per cent year-on-year (Y-o-Y), and deposits of ₹12.4 trillion, up 4 per cent Y-o-Y. Despite a marginal decline in the current account savings account (CASA) ratio to 32.5 per cent, the credit-deposit ratio remained comfortable at 79 per cent. The bank’s net interest income stood at ₹9,113 crore, while its net interest margin moderated due to lower income from non-performing asset (NPA) recoveries and the absence of PSLC income, though this was partly offset by higher treasury gains. Operating profit came in at ₹6,909 crore, while net profit rose 12 per cent Y-o-Y to ₹4,116 crore, driven by a 32 per cent reduction in provisions and a lower effective tax rate. Asset quality continues to strengthen, with gross NPA and net NPA declining to 3.52 per cent and 0.62 per cent respectively, alongside a robust provision coverage ratio of 94.65 per cent. Capital adequacy remains strong with CRAR at 18.3 per cent and CET1 at 15.3 per cent, while credit cost eased to 0.47 per cent.

 

Union Bank’s performance reflects consistent improvement across return ratios, with return on asset (RoA) at 1.1 per cent and return on equity (RoE) at 15.1 per cent. The bank has successfully maintained profitability above 1 per cent RoA for two consecutive years, supported by strong recoveries, prudent provisioning, and disciplined cost management. With a large recovery pipeline and declining credit costs, the outlook for earnings growth remains favorable. At the current market price of ₹146, the stock trades attractively at about 1.0x FY26E book value and 6.8x FY26E earnings per share (EPS). Backed by its improving asset quality, stable margins, and strong capital position, we like the stock at current levels.  ALSO READ | Motilal Oswal sector of the week: Genset; Cummins, Kirloskar Oil top picks

Apollo Hospital – Buy   

 

CMP: ₹7,679

 

FV: ₹9,135

 

Support: ₹7,550-7,400

 

Resistance: ₹7,800-7950

 

Apollo Hospitals Enterprise Ltd. (APHS) stands as one of India’s largest and most diversified healthcare groups, operating over 10,000 beds across 73 hospitals and more than 6,200 pharmacy outlets nationwide. Its well-distributed presence across the country, with limited exposure to the intensely competitive Delhi-NCR region, offers business stability and strong regional diversification. Unlike peers pursuing aggressive expansion, Apollo’s measured approach—with only 17 per cent bed addition planned over FY25-27—helps contain execution risks while supporting steady growth.

 

In a recent development, Apollo has announced the acquisition of IFC’s 30.6 per cent stake in Apollo Health & Lifestyle Ltd. (AHLL), its retail healthcare arm, for ₹1,254 crore. This transaction values AHLL’s equity at ₹4,100 crore and raises Apollo’s ownership to 99.4 per cent. The move marks another significant step toward simplifying its corporate structure, following the planned demerger of its digital and pharmacy business, Apollo Healthtech. AHLL currently contributes around 7 per cent of consolidated revenues and houses key assets like diagnostics, clinics, and specialty formats such as Cradle and Spectra.

 

Simultaneously, Apollo continues to strengthen its oncology portfolio with a new Proton therapy facility in Gurugram, involving a capex of ₹570 crore. Expected to be operational by FY2029, this will be Apollo’s third Proton center after Chennai and Hyderabad, expanding its treatment capacity by an additional 350 patients per year. The company aims to grow oncology revenues from ₹1,880 crore to over ₹5,000 crore in the next 3–4 years—an ambitious yet achievable goal given the rising demand for advanced cancer care in India.

 

Financially, Apollo remains well-positioned with robust free cash flows and improving margins in its pharmacy business. While recovery in its digital platform, Apollo 24/7, is expected by FY26, management’s focus on cost efficiency and monetization through corporate tie-ups provides visibility on profitability.

 

At a fair value estimate of ₹9,135 per share, Apollo trades at around 40x FY26E earnings, reflecting its leadership in the healthcare sector, strong execution track record, and prudent capital allocation. With a balanced growth strategy and a cleaner corporate structure, Apollo Hospitals continues to be a preferred play in India’s expanding healthcare landscape.  (Disclaimer: This story is by Shrikant Chouhan, head of equity research, Kotak Securities. View expressed are his own.)