Fw: Investor's Eye: Update - ICICI Bank (Robust growth in profits; maintain Buy); Viewpoint - Idea Cellular (Strong traffic growth enhances revenue, but policy uncertainty continues)

 

 

Investor's Eye [April 27, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE ICICI Bank Cluster: Apple Green Recommendation: Buy Price target: Rs1,070 Current market price: Rs861 Robust growth in profits; maintain Buy  Result highlights ICICI Bank's Q4FY2012 earnings were significantly ahead of our as well as the street's estimates as the net profit grew by 31% year on year (YoY; 10% quarter on quarter [QoQ]) to Rs1,902 crore. The growth in profits was driven by a strong growth in the net interest income (NII) and non interest income. Aided by a 30bps sequential increase in the net interest margin (NIM; 3.01% vs 2.7% in Q3FY2012) the NII grew by 23.7% YoY (14.5% QoQ). The transmission of base rate, rise in investment yields and rundown of securitisation losses fueled growth in NIM. Business growth remained healthy as advances grew by 17.3% YoY (3.1% QoQ) whereas the deposits grew by 13.3% YoY. The current account - savings account (CASA) ratio remained stable at 43.5% while the average CASA balances were 39% in Q4FY2012. The non interest income increased by 35.8% YoY (17.8% QoQ) on account of a strong growth in the dividend income and treasury profits. The fee income growth remained subdued as it declined by 3.5% YoY. Improvement in asset quality continued for the seventh quarter in a row as the gross and net non performing assets (NPAs) declined to 3.62% and 0.73% respectively. The provision coverage ratio (PCR) also improved during the quarter to 80.4% from 78.9% in Q3FY2012. The bank restructured an additional Rs1,400 crore of advances during the quarter taking the total restructured book to Rs4,256 crore (1.7% of advances). Valuation: ICICI Bank's Q4FY2012 results mark a significant improvement in margins and asset quality, leading to an improvement in the earning profile. We expect the bank's earnings to grow at a compounded annual growth rate (CAGR) of 15% YoY (FY2012-14) contributing to an return on assets (ROA) of 1.5%. We maintain our Buy recommendation on the stock with a sum of the parts (SOTP) based target price of Rs1,070.       VIEWPOINT Idea Cellular        Strong traffic growth enhances revenue, but policy uncertainty continues Idea Cellular (Idea)'s Q4FY2012 results displayed strong operational and execution strength by the company wherein in a tough quarter it continued to gain subscribers as well as traffic growth with expansion on the margin front. What happened in the quarter gone by? Strong top line driven by traffic growth: The top line grew at 6.7% sequentially, that is by an approximately 3.2% higher rate than our estimate. The same was largely led by high tariff growth, increased share of value added services (VAS; at 14.3% vs 13.7% in Q3FY2012) and roaming revenues. Reported OPM down; adjusted profit sees expansion: The reported operating profit margin (OPM) was down 145 basis point on a sequential basis from 26.7% in Q3FY2012 to 25.3% in Q4FY2012, largely led by an increase in the network operating cost (+60 basis points quarter on quarter [QoQ]) coupled with license and WPC charges (+260 basis points QoQ). Thus the operating profit grew by a mere 1% and stood at Rs1,357 crore. This reported figure includes a one time charge of Rs150 crore booked by the company in its network operating cost. Adjusting for the same , the OPM expanded by 50 basis points on a Q-o-Q basis.  Net profit growth supported by low interest and low effective tax rate: Despite a modest rise in the operating profit, the net profit for the quarter rose by 18.9% on a sequential basis. The same was led by lower finance cost (-21% QoQ; due to repayment of Rs1,826 crore worth of loans) coupled with a dip in the effective tax rate (the tax rate stood at 30.8% in Q4FY2012 vs 32.8% in Q3FY2012). Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - Yes Bank (Earnings up by 34% YoY, CASA ratio inches up), Raymond (Liquidation drive to clear inventory results in poor earnings), Bharat Electronics (Price target revised to Rs1,805)

 

Investor's Eye [April 26, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Yes Bank Cluster: Emerging Star Recommendation: Buy Price target: Rs431 Current market price: Rs357 Earnings up by 34% YoY, CASA ratio inches up Result highlights Yes Bank's Q4FY2012 results came in line with our estimates as the net profit grew by 33.6% year on year (YoY; up 7% sequentially) to Rs272 crore. The profit growth was on account of a strong growth in the net interest income (NII) and non-interest income. The NII grew by 28.6% YoY (up 4.8% sequentially) to Rs448 crore, which was very much in line with our estimate. The growth in the NII was contributed by a steady increase in customer assets (credit + credit substitutes) and stable net interest margin (NIM).  The advances excluding credit substitutes grew by 10.6% YoY (the same including the credit substitutes grew by 20.3% YoY) whereas the deposits grew by 7% YoY and 4.7% quarter on quarter (QoQ). The current account and savings account (CASA) ratio expanded by 254 basis points QoQ to 15% led by an impressive growth in the savings deposits (up 108% QoQ). The non-interest income reported a strong growth of 42.6% YoY and 26% QoQ led by the financial advisory business (up 26.6% QoQ) and the financial market segment(42.4% QoQ). The operating expenses increased by 18.3% QoQ causing the cost-to-income ratio to increase to 39.8% from 37.6% in Q3FY2012.  There was not much change in the asset quality compared with the Q3FY2012 levels as the gross and net non-performing assets (NPAs) were at 0.22% and 0.05% respectively. The provision coverage ratio (PCR) of the bank stood at 79.2% as against 80.4% in Q3FY2012. The restructured advances stood at 0.53% of the total advances. Yes Bank continues to report a strong growth in its earnings contributed by an uptick in the core income and a robust growth in the fee income. The margins have remained steady at around 2.8% levels and could improve in the coming period due to an increase in the CASA ratio and building up of the retail, and short and medium enterprises (SME) book. The growth in the advances was moderate in FY2012 as the bank focused on consolidation while the asset quality remained the best in the industry. We have factored an equity dilution in FY2013 as the bank plans to raise equity of around $500 million in FY2012. We expect Yes Bank's earnings to grow at a compounded annual growth rate (CAGR) of 27% over FY2012-14 leading to a return on asset (RoA) of over 1.5%. We maintain our Buy rating on the stock with a price target of Rs431.        Raymond Cluster: Ugly Duckling Recommendation: Buy Price target: Rs500 Current market price: Rs404 Liquidation drive to clear inventory results in poor earnings Result highlights Q4FY2012 - good revenue growth; dismal earnings result of increased discounting: Raymond's consolidated Q4FY2012 revenues grew by a strong 13.1% year on year (YoY) to Rs949 crore, led by growth in textiles, garmenting and the denim businesses, each of which grew at a Y-o-Y pace of 24.4%, 40.5% and 14% respectively for the quarter. Despite a robust show on the revenue front, the earnings plunged 89% YoY to Rs3.2 crore due to margin compression (as a result of heavy discounting done for inventory liquidation) coupled with an increase in the interest charge. For the quarter, the company added 46 stores, while same store sales showed a healthy 15% growth.  Earnings revision: The management in its commentary sounded committed to its core strategy of focusing on its four power brands and enhancing its already strong network with new stores in the hinterlands (smaller towns and cities). But for the short term ie H1FY2013, it sounded cautiously optimistic. Building the same momentum in our estimates we have revised our earnings for FY2013, with new EPS at Rs Rs32.8 and have also introduced our FY2014 estimates where we expect Raymond to report an earning per share (EPS) of Rs39.7 for the year.  Strong brand play - we maintain Buy: Raymond's Q4FY2012 performance has been resilient in the light of challenging macroeconomics (demand slowdown, high input cost pressure) . We believe that Raymond, with its continuous focus towards its power brands and strong distribution franchise, is all set to encash on the strong secular consumer wave waiting ahead. Hence we continue with our bullish view on the company. Further, any development with regard to the Thane land in the form of either joint development or disposal would lead to value unlocking and provide significant cash for the company. We continue to maintain our Buy rating on the stock and our revised sum of the part (SOTP) based target price of Rs500 (valuing the core business at 10x FY2014E earnings plus 50% value for the Thane land bank parcel).      Bharat Electronics Cluster: Apple Green Recommendation: Buy Price target: Rs1,805 Current market price: Rs1,466 Price target revised to Rs1,805 Result highlights Weak operational performance, other income the saviour: Bharat Electronics Ltd (BEL) closed FY2012 with a poor performance on the revenue front which had an impact on the margins and the bottom line. Against a full year sales target of Rs6,200 crore, the company reported sales of Rs5,710 crore. The fourth quarter is the strongest for BEL with more than 40% of the full year's revenues delivered in the quarter. In FY2012, the fourth quarter contributed 40% of the total revenues of the company. However, in FY2012 there was a revenue lag starting from the middle of the year which could not be recouped. Also, the company faced delays in accepting deliveries from its customers, mainly government and quasi government organisations. For the quarter ended March 2012, BEL reported a 3.3% fall in its revenues to Rs2,232.1 crore. The EBITDA margin was down 1,140 basis points to 11.5% affected by a higher input cost. However, on the back of a 62.9% jump in the other income to Rs212.3 crore the fall in the net profit was restricted to 25.5% at Rs333.8 crore. Margins remain under pressure: The margins of the company remained under pressure with the EBITDA margin down 1,140 basis points to 11.5% in Q4FY2012. The gross profit margin (GPM) of the company was down 1,170 basis points to 32% on account of input cost pressure. For FY2012, the EBITDA margin stood at 7.8% against 16.2% in FY2011. One of the reasons for the dip in the margin could be the the depreciation of the rupee as one-third of the company's expenses is in foreign currency. Another reason would be that the share of the revenues from the defence sector was down to 73% from 80% during the period. Finally, the delay in accepting deliveries from clients, generally government and quasi government organisations, would have led to pressure on the margins. FY2013 revenue target at Rs6,300 crore: For FY2012, BEL reported net sales of Rs5,645.3 crore, up 3.2% with the EBITDA margin down to 7.8% from 16.2% in FY2011 and the net profit down 12.2% at Rs756.3 crore. For FY2013 the management has set a revenue target of Rs6,300 crore, implying a growth of 10.3% over FY2012. In FY2013, the company would be working on many strategically important projects in the areas of weapon systems, electronic warfare systems, shipborne systems, coastal surveillance system, network centric systems, night vision devices, Satcom and communications.  Valuation and view: BEL has reported a poor show for FY2012 on account of the execution of the low-margin non-defence business as well as a delay in decision making by its customers. BEL remains one of the best plays in the defence capital expenditure space. With the increase in the defence budget and the focus on modernisation of the defence technology, BEL is best placed to take a sizeable pie of the defence spend. The order book at 4.5x FY2012 sales gives BEL strong revenue visibility for at least the next two to three years. The huge cash reserve gives the stock further support. The key risks, however, remain the timely delivery of orders and the margin performance, which has deteriorated through FY2012. We have introduced our FY2014 estimates and rolled over our PE multiple in this note. We maintain our Buy rating on the stock with a revised price target of Rs1,805 (Rs1,893 earlier) in view of the strong long-term growth outlook for the company. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Special LIVE trading session on Saturday April 28, 2012

 

Dear Customer, This is to inform you that The National Stock Exchange of India Ltd (NSE) and Bombay Stock Exchange Ltd (BSE) will be conducting a special LIVE trading session on Saturday, April 28, 2012. Market timings for special live trading session on Saturday, April 28, 2012 in Capital market segment will be as follows: NSE & BSE Saturday, April 28, 2012 Time Market Open 11:15 hrs Market Close 12:45 hrs Closing session start 13:05 hrs Closing session end 13:15 hrs Market timings for the F&O Segment on Saturday April 28, 2012 will be as follows: NSE Saturday, April 28, 2012 Time Normal Market Open 11:15 hrs Normal Market Close 12:45 hrs Please note: The daily mark to market settlement for Futures and premium settlement for Options for trades done in F&O Segment on Saturday, April 28, 2012 will take place on Monday, April 30, 2012. Shares bought on April 27, 2012 should not be sold on , April 28, 2012 as trades done on both these days will be settled together Wednesday, May 02, 2012. The timings for pay-in schedule for stocks sold on April 27, 2012, and April 28, 2012 will be at 09.30 a.m. and 1.30 p.m. respectively.

If you require any clarifications or assistance, you may please write to us at cs@indiainfoline.com or Reach our Customer Care Desk at (022) 40071000 or at our zonal customer service numbers: North 011-49315020, East 033-44048600, Maharashtra-022-40609292, Gujarat and Madhya Pradesh 079-40271800, South-080-40547030. Regards, Loveena Khatwani Head, Customer Service India Infoline Limited

Fw: Stock Idea: Mcleod Russel India (Take a sip when it is hot)

 

 

Stock Idea [April 24, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK IDEA Mcleod Russel India Cluster: Ugly Duckling Recommendation: Buy Price target: Rs339 Current market price: Rs267 Take a sip when it is hot Key points  Favourable global demand-supply scenario: Another year of a production shortfall in the key tea exporting countries (including Kenya) has widened the demand-supply gap in the global tea markets in CY2011. In India too the demand exceeded the supply with the black tea production increasing by 2.3% YoY to 988.3 million kg in CY2011 against a 3% growth in tea consumption. This resulted in a deficit of 55 million kg in the Indian market in CY2011. The scenario is favourable for the tea producers as their realisation would continue to improve due to the demand-supply mismatch globally. We expect a growth of Rs10-15 per kg in the realisation in the next two years.  Mcleod Russel-the largest black tea producer: Mcleod Russel India (MCR) is the world's largest tea producer with an annual tea production of close to 100 million kg. This is close to 5% of the global black tea production of around 1,945 million kg. The company has 62 tea estates covering a total area of 38,758 hectares (1.1% of the world's total area under tea cultivation). With a domestic production capacity of close to 92 million kg MCR is well poised to capitalise on the growing demand for Indian black tea in the global markets.  Higher realisations to boost margins: Tea manufacturing companies have a higher operating leverage, as any significant improvement in their realisation results in a strong improvement in their profitability. MCR's consolidated OPM improved from 10.3% in FY2008 to 26.8% in FY2011. What's more, we expect its blended realisation to go up by Rs11-12 per kg annually over the next two years which will keep the margins firm and leave scope for another 120-130-basis-point improvement going ahead. Cash inflows to remain robust: Keeping in view its robust performance in the last couple of years, MCR has reduced its debt-equity ratio to 0.1x. With expectations of strong cumulative operating cash inflows of around Rs730 crore over the next two years, MCR is expected to improve the dividend pay-out and/or build a cash war chest for potential inorganic initiatives in future.  Outlook and valuation: MCR, which has tea estates in India and Africa, is well poised to take advantage of the current favourable global demand-supply scenario. With the expectations of a substantial improvement in its sales realisation and a volume growth in mid to high single digits (in the domestic market and the international subsidiaries), MCR's consolidated top line and earnings are expected to grow at CAGR of 16% and 21% respectively over FY2011-14. Even after excluding the upside from the treasury shares (25% of the outstanding shares), the stock's valuations are attractive as it is trading at 8.5x its FY2013E EPS of Rs31.4 and 7.1x its FY2014E EPS of Rs37.7. We initiate coverage on the stock with a Buy recommendation and a price target of Rs339.   Click here to read report: Stock Idea   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Thematic Report (Closing M&M to Maruti Switch call); Update - Tata Consultancy Services, Reliance Industries, IDBI Bank; Viewpoint - FAG Bearings

 

 

Investor's Eye [April 23, 2012]  Sharekhan www.sharekhan.com

Summary of Contents THEMATIC REPORT Closing M&M to Maruti Switch call 40% returns made on M&M to Maruti Switch call  In our note dated December 27, 2011, we had given a Switch call from Mahindra and Mahindra (M&M) to Maruti Suzuki. From the levels of Rs968 for Maruti Suzuki and Rs702 for M&M, the call would have given 40% returns if equal amounts had been invested in both the stocks. This compares with the 9.5% return given by benchmark index, the Nifty, over the same period. Rationale for closing the "M&M to Maruti Switch" call Maruti: positives priced in with no re-rating triggers in the near term; scope for negative news flow in the form of recurrence of labour issues Maruti Suzuki has given over 40% return; much higher than the general index as well as the automobile index. The diesel portfolio story, successful launches of new products on the Swift platform and reduced competitive intensity played out well for the company. The sharp appreciation in the stock price factored in the positives.  However, the risk-reward ratio seems to be balancing out for Maruti Suzuki and the stock may react immediately to any negative news flow. The Manesar workers are now demanding a five-fold increase in the basic pay; conveyance facilities within a 100km radius; higher dearness allowance etc. The company has also increased dealer margins on petrol cars from 4% to 10%. We believe that the stock has not priced in the negative news as yet. Currently, we have a Hold rating on Maruti Suzuki.  M&M: potential revival in tractor sales in H2FY2013; good monsoon forecast can lead to outperformance in the near term  M&M, on the other hand, has significantly underperformed the Sensex as well as the automobile index. The much anticipated diesel tax did not come in the Union Budget for FY2013. The slowdown in the tractor segment has been factored in the stock price. In fact, a good monsoon and the launch of a new tractor platform could help revive the demand for tractors in H2FY2013. We believe that there are limited downsides for M&M as there may not be many reasons for its underperformance from the current levels. Currently, we have a Hold rating on M&M.   STOCK UPDATE Tata Consultancy Services Cluster: Evergreen Recommendation: Buy Price target: Rs1,364 Current market price: Rs1,059 Price target revised to Rs1,364 Result highlights Back with a bang, outperformance across parameters: Tata Consultancy Services (TCS) reported an impressive set of numbers for Q4FY2012, with a top line growth of 2.4% quarter on quarter (QoQ) to $2,648 million (a tad higher than our expectation of $2,620.5 million). The top line growth was aided by a 3.3% sequential blended volume growth (ahead of our expectation and in contrast to Infosys' 1.5% volume de-growth). On a constant currency basis, the revenues were up 2.3% QoQ to $2,641 million and pricing was down 97 basis points (bps). In Indian Rupee (INR) terms the revenues were up 0.4% QoQ to Rs13,259.3 crore, impacted by sequential rupee appreciation of 1.9%.  For the quarter under review, the earning before interest and tax (EBIT) margin has declined by 155bps to 27.7% (ahead of our expectations of 27.2%) on account of appreciation in the rupee (-71bps) and higher selling, general and administration (SG&A) expenses (-120bps). The net other income turned positive to Rs107.7 crore as against losses of Rs92 crore in Q3FY2012, driven by lower foreign exchange losses to the tune of Rs91.4 crore as compared to Rs280 crore in Q3FY2012. The net profit was higher by 1.6% QoQ to Rs2,932.4 crore (ahead of our estimate of Rs2,817.4 crore). During the quarter the company made a net addition of 11,832 headcounts and indicated at adding at least 50,000 headcounts in FY2013 including 43,600 campus offers. TCS has added 42 new clients and signed six large deals in the quarter.  Management commentary allays concerns for the sector, indicates at strong demand momentum: After Infosys' relatively weak demand commentary and subdued growth guidance for FY2013, TCS' management commentary was in stark contrast with affirmation of demand momentum and confidence of comfortably outpacing the Nasscom growth projection (11-14%) for FY2013. Although TCS' management indicated at growing uncertainties owing to the volatile macro economic environment, at the same time it instilled confidence with indication of strong business visibility with deals signing happening on the anticipated line and pick up in the discretionary projects which would lend comfort to earning sustainability in the coming quarters. Further, TCS' gross hiring plans of about 50,000 headcounts for FY2013 (on the backdrop of an already strong bench strength) and 8% average wage hikes with no cuts in the variable pay, is a strong testimonial to robust revenue visibility for the company for the year ahead.  Valuation and view: After facing minor hiccups in Q3FY2012, TCS' performance surprised positively with a strong outperformance across the parameters. Further, affirmative management commentary on the demand environment and margin sustainability does lend comfort to our preference for TCS over Infosys. On the valuation front, the premium valuation of TCS over Infosys is likely to sustain and widen further owing to better and predictable earning profile of TCS and lesser investor confidence in Infosys. At the current market price of Rs1,059, the stock trades at 15.8x and 14x our FY2013 and FY2014 earnings estimates respectively. We have introduced our estimates for FY2014 and roll over our price earning (PE) multiple to FY2014 with a revised target price of Rs1,364. We maintain our Buy rating on the stock.      Reliance Industries Cluster: Evergreen Recommendation: Buy Price target: Rs890 Current market price: Rs736 Earnings largely supported by other income Result highlights PAT ahead of expectations due to surge in other income and better gross refining margins: Reliance Industries Ltd (RIL) in its Q4FY2012 results posted a net profit of Rs4,236 crore which is a decline by 21.2% on a year-on-year (Y-o-Y) basis and 4.6% on a quarter-on-quarter (Q-o-Q) basis. The decline in the earnings is largely on account of severe contraction in profitability of the petrochemical division and the exploration and production (E&P) division of the company. However, the earnings of the company were ahead of our estimates on the back of a surge in the other income and better than expected gross refining margin (GRM). The GRM during the quarter stood at $7.6/bbl (better than the Street's expectation) as compared to $6.8/bbl during Q3FY2012 and $9.2/bbl in Q4FY2011. We had factored in a GRM of $6.5/bbl in our Q4FY2012 estimates.  Net sales up 17.2% YoY: RIL reported a revenue growth of 17.2% YoY to Rs85,182 crore which is 2% lower than our estimates. The overall revenue growth has been largely driven by a healthy revenue growth of 21.5% in the refining business and a 17.7% revenue growth in the petchem division. However, the E&P division posted a de-growth in revenue by 36.4% on account of falling output from KG-D6.  Margins decline by 584bps YoY: The operating profit margin (OPM) contracted by 584 basis points YoY to 7.7%. The key reason behind the severe margin pressure is a) a drop in the GRM to $7.6/bbl from $9.2/bbl in Q4FY2011, b) contraction in the petchem EBIT margin by 428bps and c) a drop in the EBIT margin of the E&P division to 36.5% as compared to 61.1% in Q4FY2011 and 45.7% in Q3FY2012. Consequently, the operating profit of the company declined by 33.3% YoY to Rs6,563 crore as compared to a 17.2% growth in revenues.  Surge in other income limits de-growth in bottom line: The other income during the quarter surged to Rs2,295 crore as compared to Rs917 crore in the corresponding quarter of the previous year. The surge in the other income has been largely supported by the healthy cash on the books. Hence the de-growth in the bottom line has been limited to 21.2% as compared to a 33.3% de-growth at the operating level.  Net profit for FY2012 declines: For the full year FY2012 the company has posted a 32.9% growth on the revenue front supported by the refining and petchem divisions. However, on account of margin (which contracted by 517bps) pressure the net profit of the company declined by 1.2% compared to FY2011 to Rs20,040 crore. Further the board of directors has recommended a final dividend of 85% (Rs8.5/share) for FY2012.  Board approves buyback: The board has approved buyback of upto 12 crore fully paid up equity shares at a price not exceeding Rs870 per equity share. The buyback is upto an aggregate amount not exceeding Rs10,440 crore. During the year the company has bought and extinguished 36,63,431 equity shares for an amount of Rs279 crore.  Downgrading earnings estimates for FY2013 & FY2014: We are downgrading our earnings estimates for FY2013 and FY2014 mainly to factor in lower than expected margin in the petchem business and drop in the output from the KG basin. Consequently the revised earnings per share (EPS) now stands at Rs62 for FY2013 and Rs64.3 for FY2014.  Maintain Buy with a price target of Rs890: Though the operational matrices are showing signs of concern, we believe most of the negatives are factored in the current valuation of the stock, thereby leaving limited downside potential in the stock price from the current level. On the other hand there is no trigger in the near term for RIL due to the overhang in terms of output from KG basin and continued margin pressure in the petchem business. However, any development in terms of increase in gas price or margin improvement in the petrochemical business could be positive for RIL. Hence we maintain our Buy recommendation on the stock with a target price of Rs890 (based on sum of the parts [SoTP] valuation method). Currently, the RIL stock is trading at 11.9x and 11.5x its FY2013 and FY2014 estimated earnings.   IDBI Bank Cluster: Cannonball Recommendation: Hold Price target: Rs131 Current market price: Rs105 Q4 earnings beat expectations, slippages decline Result highlights IDBI Bank's Q4FY2012 earnings were significantly ahead of our estimate as the same grew by 49.3% year on year (YoY) and 88% quarter on quarter (QoQ) to Rs771 crore. The earnings growth was driven by lower provision expenses, a strong growth in the fee income and the reversal of the deferred tax liability.  The net interest income (NII) was in line with our estimate as it grew by 9.2% YoY (up 14.3% QoQ) to Rs1,211 crore. A sequential increase in the net interest margin (NIM) and a growth in the advances aided the growth in the NII. The NIM increased by 18 basis points sequentially to 2.07% led by a decline in the cost of funds. The current account and savings account (CASA) ratio expanded to 24.1% (19.7% in Q3FY2012) though the average CASA balances were at about 17% in Q4FY2012. The advances grew by 15.3% YoY (up 16% QoQ) led by a 20% year-on-year (Y-o-Y; up 14.4% QoQ) growth in the corporate advances and a 76% Y-o-Y growth (up 58.3% QoQ) in the agriculture advances. The deposits of the bank grew by 16.6% YoY (up 18.8% QoQ) during the quarter. The non-interest income grew by 15% YoY (up 79.9% QoQ) led by a strong growth in the fee income while the treasury income was modest. The operating expenses grew by 28.5% YoY leading to an increase in the cost-to-income ratio to 39.9% vs 34.6% in Q4FY2011.  The asset quality of the bank improved as the gross and net non-performing assets (NPAs) declined to 2.49% and 1.61% respectively due to lower slippages. Consequently, the provisions declined by 2.9 YoY and 32.6% QoQ. We maintain our Hold recommendation on the stock due to the weak macro-economic environment which could result in asset quality pressures and lower return ratios (return on equity [RoE] of 11% and return on asset [RoA] of 0.7% in FY2013).  Valuation IDBI Bank's Q4FY2012 results were characterised by an improvement in the NIM and a decline in the NPAs. However, the NII growth was slightly subdued due to a slower growth in the advances and a relatively higher cost of funds. The bank's RoE and RoA are expected to remain at 11% and 0.75% respectively in FY2013 due to the increase in equity (capital infusion) and the slower growth targeted by the management. Though the NPAs declined in Q4FY2012, the weak macro-economic environment continues to cast a shadow on the asset quality of the bank. We, therefore, maintain our Hold recommendation on the stock with a price target of Rs131 (0.8x FY2014 BV). VIEWPOINT FAG Bearings        Savli factory to be the game changer FAG AGM notes: Savli factory to be the game changer FAG Bearings India (FAG Bearings) has undertaken the biggest capital expenditure (capex) in its history. With a capex of Rs155 crore the company plans to set up a state-of-the-art plant at Vadodra, Savli. The new plant would significantly increase its competitiveness in the industrial segment particularly in the wind farm segment where large bearings are used. Significant modernisation is being undertaken in the old Maneja plant at Vadodra as well.  The company has supplied gen-3, bearing sub-assembly systems for the recently launched Maruti Ertiga and will do 100% supplies for the multi-purpose vehicle (MPV).  X-life bearings introduced by the company last year boosted its exports, which increased 57% in 2011. The production of X-life cylindrical roller bearings and spherical roller bearings was expanded in the Maneja in Vadodra and the products have been widely approved by customers in Asia, Europe and the USA. Exports contribute 12% to the sales of FAG Bearings.  At the Auto Expo 2012 the company showcased advanced drive solutions that could increase vehicle fuel efficiency by 30%. Some of these products would be produced at the newly commissioned Savli factory. View: FAG Bearings-a structural growth story with medium-term hiccups  FAG Bearings has expressed concerns over growth in the immediate period in both the automotive and the industrial segment.  The company's margins are also expected to move lower from the 19.6% base of CY2011. In CY2012 the PAT growth is expected to be muted as the impact of depreciation would take place on account of the commissioning of the new Savli plant.  The sharp run-up in the stock price has not fully priced in the issues of immediate slowdown and the stock price may start pricing the same in the days ahead.  However, the Savli plant is expected to be the game changer for the company in the long run and place the company in a new league. The breakthrough products such as gen-3 bearing hub, X-life bearings, would position the company on a strong growth trajectory.  FAG Bearings' growth story will pay rich rewards in the long run but there are growth and margin challenges in the medium term. We have a neutral view on the stock. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Extended LIVE TRADING session on Tuesday, April 24, 2012 in Capital Market Segment

 

Dear Customer, This is to inform you that, Exchange is conducting an extended live trading session on Tuesday, April 24, 2012 on auspicious occasion of Akshaya Tritiya for trading in Gold Exchange Traded Fund (Gold ETF) securities only. Regular market timings Normal / Odd lot / Retail Debt Market Open 09:15 hrs Normal / Odd lot / Retail Debt Market Close 15:30 hrs Closing session start* 15:40 hrs Closing session end* 16:00 hrs No post close session for GOLD ETF securities   Extended market timings for Gold ETF securities only Normal Market Re-Open time 16:30 hrs Normal Market close time 20:00 hrs No closing session after extended market close   If you require any clarifications or assistance, you may please write to us at cs@indiainfoline.com or Reach our Customer Care Desk at (022) 40071000 or at our zonal customer service numbers: North-011-49315020, East- 033-44048600, Maharashtra-022-40609292, Gujarat and Madhya Pradesh - 079-40271800, South-080-40547030. Regards, Loveena Khatwani Head, Customer Service India Infoline Limited