Bank of India reported a 24.1% year-over-year increase in net profit to Rs725 crore for the first quarter of fiscal year 2011, with robust operating performance and lower provisions contributing to earnings growth. Advances grew 19.6% year-over-year while deposits increased 19.8% driven by improved credit demand. Net interest margin expanded to 2.89% from better asset yields and lower funding costs. Asset quality also improved with gross and net NPA ratios declining, though provisions remained high.
Hindustan Zinc reported lower than expected quarterly results, with net revenue of Rs1,951cr and net profit of Rs891cr, both below estimates. Revenue grew 29% year-over-year due to higher metal prices but fell 22% quarter-over-quarter due to lower production from mines and maintenance work. Margins expanded modestly to 52.4% as increased costs offset the revenue growth. The analyst maintains a Buy rating based on expansion projects and potential takeover of remaining government shares.
Oriental Bank of Commerce reported a 41.1% rise in net profit for the quarter compared to the same period last year. Net interest income grew 118.4% on strong loan growth of 20.3% and deposit growth of 19.8%. Asset quality was stable with gross and net NPA ratios of 1.7% and 0.7% respectively. The bank upgraded its target price for OBC stock to Rs. 409 based on improved near-term net interest margins and asset quality.
HDFC Bank reported strong growth in net profit of 32.7% year-over-year and 12.4% quarter-over-quarter. Gross advances grew 37.7% year-over-year, significantly outpacing industry growth. Deposits also increased substantially by 30.4% year-over-year. Asset quality remained stable with gross NPAs at 1.2% and net NPAs at 0.3%, while the bank maintained a healthy capital adequacy ratio of 17%.
Sesa Goa's 1QFY2011 results were in line with estimates at the top line, but bottom line was ahead due to a lower tax rate. Top line growth of 138.6% was driven by higher iron ore prices, while volume growth was only 14.9% due to permit issues. EBITDA margins expanded significantly due to strong operations leading to a 208.3% rise in net profit. While Chinese steel and iron ore production is growing, imports have declined recently due to rising domestic Chinese iron ore production, causing a 31.5% drop in iron ore prices since April. The company is trading at attractive valuations but the outlook for volume growth is uncertain due to delays in permits and infrastructure issues.
TAJGVK reported a 27.6% year-over-year growth in net sales to Rs61 crore for the first quarter of FY2011, driven by rising occupancy rates and average room rates. Operating profit grew 46.7% due to higher sales absorbing fixed costs, and net profit increased 106.7% as improved operating performance flowed down to the bottom line. Going forward, the company expects to benefit from the economic recovery and expanding presence across markets like Hyderabad, Chennai, and Bangalore through both organic and inorganic growth initiatives. The analyst maintains a buy rating on TAJGVK due to its dominant position, expansion plans, and attractive valuation at current levels.
JSW Steel reported lower than expected results for 1QFY2011 with net revenue of Rs4,779cr, down 12.2% quarter-over-quarter due to a decline in sales volume. EBITDA grew 64.7% year-over-year to Rs1,134cr but the margin increased only 646bps to 23.7% due to higher staff costs and other expenses. Net profit was Rs295cr, a 26.2% increase from a year ago but below estimates. JSW Steel finalized a strategic investment deal with JFE Steel worth Rs4,800cr that will help reduce debt and provide access to new technologies. Management expects sales volume and profitability to improve in the coming
ICICI Bank's net profit increased by 35.2% year-over-year, in line with estimates. Key positives were a further improvement in CASA ratio to 41.7% and declining retail loan slippages for four consecutive quarters. However, balance sheet and network growth were lower than expected. With a capital adequacy of 19.4%, the bank is well-positioned for growth, though branch expansion plans seem slower than anticipated. The stock remains attractive at current levels, leading analysts to maintain a 'Buy' rating.
Cairn India reported a quarterly net profit of Rs281cr for 1QFY2011, an increase of 519.3% over the previous year. Revenue grew 310.1% to Rs841cr due to higher production and realisations from the Mangala oil fields. Operating margins expanded significantly to 77% from 64.5% last year due to lower production costs. However, net profit was lower than estimates due to higher financing costs and lower other income. While production and revenues grew strongly year-over-year, costs were also higher than expected, leading to profits below analyst forecasts.
Hindustan Zinc reported lower than expected quarterly results, with net revenue of Rs1,951cr and net profit of Rs891cr, both below estimates. Revenue grew 29% year-over-year due to higher metal prices but fell 22% quarter-over-quarter due to lower production from mines and maintenance work. Margins expanded modestly to 52.4% as increased costs offset the revenue growth. The analyst maintains a Buy rating based on expansion projects and potential takeover of remaining government shares.
Oriental Bank of Commerce reported a 41.1% rise in net profit for the quarter compared to the same period last year. Net interest income grew 118.4% on strong loan growth of 20.3% and deposit growth of 19.8%. Asset quality was stable with gross and net NPA ratios of 1.7% and 0.7% respectively. The bank upgraded its target price for OBC stock to Rs. 409 based on improved near-term net interest margins and asset quality.
HDFC Bank reported strong growth in net profit of 32.7% year-over-year and 12.4% quarter-over-quarter. Gross advances grew 37.7% year-over-year, significantly outpacing industry growth. Deposits also increased substantially by 30.4% year-over-year. Asset quality remained stable with gross NPAs at 1.2% and net NPAs at 0.3%, while the bank maintained a healthy capital adequacy ratio of 17%.
Sesa Goa's 1QFY2011 results were in line with estimates at the top line, but bottom line was ahead due to a lower tax rate. Top line growth of 138.6% was driven by higher iron ore prices, while volume growth was only 14.9% due to permit issues. EBITDA margins expanded significantly due to strong operations leading to a 208.3% rise in net profit. While Chinese steel and iron ore production is growing, imports have declined recently due to rising domestic Chinese iron ore production, causing a 31.5% drop in iron ore prices since April. The company is trading at attractive valuations but the outlook for volume growth is uncertain due to delays in permits and infrastructure issues.
TAJGVK reported a 27.6% year-over-year growth in net sales to Rs61 crore for the first quarter of FY2011, driven by rising occupancy rates and average room rates. Operating profit grew 46.7% due to higher sales absorbing fixed costs, and net profit increased 106.7% as improved operating performance flowed down to the bottom line. Going forward, the company expects to benefit from the economic recovery and expanding presence across markets like Hyderabad, Chennai, and Bangalore through both organic and inorganic growth initiatives. The analyst maintains a buy rating on TAJGVK due to its dominant position, expansion plans, and attractive valuation at current levels.
JSW Steel reported lower than expected results for 1QFY2011 with net revenue of Rs4,779cr, down 12.2% quarter-over-quarter due to a decline in sales volume. EBITDA grew 64.7% year-over-year to Rs1,134cr but the margin increased only 646bps to 23.7% due to higher staff costs and other expenses. Net profit was Rs295cr, a 26.2% increase from a year ago but below estimates. JSW Steel finalized a strategic investment deal with JFE Steel worth Rs4,800cr that will help reduce debt and provide access to new technologies. Management expects sales volume and profitability to improve in the coming
ICICI Bank's net profit increased by 35.2% year-over-year, in line with estimates. Key positives were a further improvement in CASA ratio to 41.7% and declining retail loan slippages for four consecutive quarters. However, balance sheet and network growth were lower than expected. With a capital adequacy of 19.4%, the bank is well-positioned for growth, though branch expansion plans seem slower than anticipated. The stock remains attractive at current levels, leading analysts to maintain a 'Buy' rating.
Cairn India reported a quarterly net profit of Rs281cr for 1QFY2011, an increase of 519.3% over the previous year. Revenue grew 310.1% to Rs841cr due to higher production and realisations from the Mangala oil fields. Operating margins expanded significantly to 77% from 64.5% last year due to lower production costs. However, net profit was lower than estimates due to higher financing costs and lower other income. While production and revenues grew strongly year-over-year, costs were also higher than expected, leading to profits below analyst forecasts.
Union bank result update 4 qfy2010 100510guest45ce0f1
Union Bank of India reported a 27.6% year-over-year increase in net profit for the fourth quarter of fiscal year 2010, beating expectations. Loan growth was 23.4% and deposit growth was 22.6% for the quarter. While asset quality pressures rose with an increase in the gross NPA ratio, the bank's net interest income grew 50.7% due to strong growth in current and savings deposits. The analyst recommends accumulating the stock due to the bank's profitable operations and competitive position, setting a target price of Rs318, an 8% upside from current levels.
Steel Authority of India reported a 1.7% decline in EBITDA to Rs. 1,843 cr for the first quarter of FY2011, below Angel Research's estimate, due to lower sales volume and higher staff costs. Net profit declined 11.3% to Rs. 1,177 cr for the same reasons. While steel prices increased, sales volume fell 15.5% from a year ago. Staff costs rose sharply due to additional provisions for employee benefits. Going forward, the company is expected to benefit from strong domestic demand, but capacity expansion benefits will only be seen after FY2012. Angel Research maintains a Neutral rating on the stock.
1) For 1QFY2011, Punj Lloyd posted disappointing results with net sales declining 41.7% year-over-year. Operating profits declined 56.1% and the company reported a net loss of Rs 30.6 crore.
2) The top-line was lower than expected, leading the company to downgrade its FY2011 and FY2012 revenue estimates. Problem orders like Ensus and Heera are now out of the picture.
3) While past performance was weak, the outlook is more positive as slow-moving orders have picked up and most challenges are now behind the company. With many negatives priced in, the analyst maintains a "Buy" rating on expectations of improved performance in F
Inox Leisure posted strong revenue growth in the fourth quarter aided by seat additions and a big budget movie lineup. However, higher expenses and film distribution shares led to a decline in operating margins. While profits grew on a recurring basis, margins contracted. The analyst maintains a 'Buy' rating, seeing upside from the Fame India acquisition, but lowers earnings estimates to account for higher interest costs.
Hotel Leela Venture reported a 24.9% year-over-year growth in net sales to Rs105.8 crore for the first quarter of FY2011, driven by higher occupancy rates and average room rates. Operating profit was up 67.5% to Rs31.6 crore due to fixed cost absorption, leading to a significant increase in net profit to Rs9.2 crore from Rs0.4 crore in the prior-year period. Going forward, the company expects to benefit from improving industry dynamics, but its current valuation remains higher than peers.
Sesa Goa reported strong growth in net sales and profits for the fourth quarter and full year of fiscal year 2010. Net sales grew 67.6% year-over-year for the quarter and 18.1% for the full year. Net profit increased 121.5% year-over-year for the quarter and 32.2% for the full year, exceeding estimates. However, the company missed its annual volume growth guidance of 20-25% due to delays in mining permits and cyclones impacting production. While near-term strength in iron ore prices is priced into the stock, uncertainties around mining regulations and surplus cash deployment lead the analyst to maintain a neutral rating.
Blue Star reported a 25.2% year-over-year increase in net sales for the first quarter of fiscal year 2011, though margins declined and profit fell. While sales grew across all segments, higher input costs and lower commission income caused operating margins to drop 281 basis points year-over-year to 9.2%. Net profit declined 10% year-over-year due to the margin pressure and a change in accounting policy. However, the company's order backlog grew nearly 15% and the outlook for large orders remains positive.
JK Lakshmi Cement reported a 21.1% year-over-year growth in net sales for the fourth quarter of fiscal year 2010, driven by a 21% increase in sales volume. However, operating profit declined by 8.7% due to a surge in raw material and other expenses. Net profit decreased by 32.6% to Rs. 70 crore on higher depreciation and interest costs. While sales volume and capacity are increasing, accelerated industry capacity additions may put pressure on prices and profitability going forward. The analyst maintains a "Buy" rating with a target price of Rs. 86 per share based on an EV/EBITDA multiple and estimated replacement cost valuations.
Titan Industries reported strong performance in the first quarter of fiscal year 2011 that was above expectations. Revenue grew 41.9% year-over-year driven by robust growth in the jewelry and watches segments. Operating and net profits increased 40.2% and 76.5% respectively. The company's jewelry segment saw a 49.6% revenue increase and 30% volume growth. The watches segment grew revenues 21.8% with improved sales of higher margin watches. While remaining positive on growth prospects, the analyst maintains a Neutral rating due to expensive valuations.
Sterlite Industries reported net revenue of Rs7,111cr for 4QFY2010, in line with estimates. Net profit was also in line with estimates at Rs1,381cr. Revenue growth was driven by higher metal prices, strong zinc and lead business performance, and higher by-product prices. Sterlite is well positioned to capitalize on strong metal demand through expansion plans and cost reductions. The company also announced a 1:1 bonus issue and stock split.
Jain Irrigation Systems reported financial results for the fourth quarter of fiscal year 2010 that were ahead of estimates. Revenue grew 37% year-over-year driven by strong growth in the micro irrigation systems segment. Net profit increased significantly due to foreign exchange gains, while adjusted net profit grew 40% on higher sales and stable margins. However, margins were slightly lower than the previous year due to higher raw material costs for onions. While growth is expected to continue across segments, the stock price is nearing fair value, leading to a downgrade from "Buy" to "Accumulate."
Indian markets fell for the sixth straight day, with the NSE Nifty losing over 400 points and the BSE Sensex dropping more than 1400 points. The declines were driven by continued selling pressure from foreign institutional investors taking profits, as well as concerns over inflation, an upcoming interest rate hike, and policy stalemate in the central government. Most global markets also declined, with US stocks ending lower due to worries about a possible bailout of Portugal. Domestically, corporate news included Reliance Life Insurance announcing skills training for insurance agents and Reliance Power signing an agreement for a 100 MW solar power project.
The document provides a market commentary and analysis from Valuehunt on January 4th, 2013. It includes the P/E ratio of the BSE Sensex index, holdings in Valuehunt's model portfolio, global market indices performance, sectoral indices in India, notable gaining and losing stocks in the Nifty, and headlines from business publications. The document also discusses two companies undergoing demergers.
Elecon Engineering reported a 15% rise in revenue for the first quarter of fiscal year 2011. While operating margins declined slightly, profit grew 57% due to a 32% drop in interest costs. The company has a robust order backlog of Rs1,582 crore, offering high revenue visibility. Going forward, recovery in the industrial sector and opportunities in material handling equipment are expected to drive continued growth for Elecon Engineering.
The Indian stock markets fell sharply on May 3, 2011, with the BSE Sensex losing 463 points and the NSE Nifty falling 136 points. The RBI increased the repo rate by 50 basis points to 7.25% to contain inflation. Rate sensitive sectors like banking, real estate and auto declined the most. Globally, most US stocks fell and commodity prices declined. The Indian rupee closed lower at Rs. 44.34 against the US dollar. Corporate earnings and other news like projects awarded, acquisitions and investments were also reported.
Sadbhav Engineering reported a 42% increase in net sales and 83.8% increase in net profit for the first quarter of fiscal year 2011 compared to the previous year. The company saw robust growth due to a rise in order book over the last few quarters and has guided for over 35% revenue growth over the next 12 months. However, the analyst downgraded the stock to Reduce due to rich valuations and concerns over potential execution challenges due to a record high order backlog.
State Bank of India reported a 25.1% year-over-year increase in net profit for the first quarter of fiscal year 2011, exceeding analyst estimates. Net interest income grew 45.4% year-over-year due to a rise in low-cost deposits and narrowing of net interest margin. Loan growth was 20.4% year-over-year while deposit growth was 6.8% year-over-year. Non-performing assets rose slightly during the quarter but asset quality remained reasonable with net NPA ratio of 1.7%. The analyst maintains an "Accumulate" rating on the stock.
Punjab National Bank reported flat net profit of Rs1,068cr for 1QFY2011, higher than estimates due to strong growth in net interest income and non-interest income. However, asset quality pressures increased with gross and net NPAs rising significantly. Total advances grew 24.6% year-over-year driven by growth in the agriculture, SME, and corporate segments. Net interest margins declined slightly due to higher cost of deposits outpacing growth in asset yields. The bank increased provisions for NPAs in the quarter and restructured an additional Rs878cr in loans.
Corporation Bank reported a 27.8% increase in net profit for the first quarter of fiscal year 2011 compared to the same period last year, above analysts' estimates. Net interest income grew 49.2% driven by strong loan growth and an improvement in the credit-deposit ratio. However, asset quality deteriorated with gross NPAs rising 11.6% sequentially. Going forward, maintaining the loan growth rate will be challenging in a rising interest rate environment given the bank's regional operations and lower CASA ratio compared to peers.
1) Indian Bank reported an 11% increase in net profit for 1QFY2011 compared to the previous year, which was above estimates. However, gross NPAs sharply increased.
2) Advances and deposits grew by 31% and 19% respectively year-over-year. Net interest income declined slightly sequentially despite higher interest payments on savings deposits.
3) Going forward, the bank's net interest margins may decline in a rising interest rate environment given its moderate CASA ratio of 33%, and asset quality will need to be monitored in the next two quarters.
Indian Overseas Bank reported a net profit decline of 33.6% year-over-year but a rise of 57.2% quarter-over-quarter to Rs200cr for 1QFY2011, above estimates. While advances grew 7.9% year-over-year, deposits increased 8.6% year-over-year. Asset quality pressures eased with gross and net NPA ratios improving, and provisions declining sharply. However, non-interest income declined due to muted loan growth and treasury gains. Operating expenses rose 15.2% year-over-year.
HDFC Bank reported a 33.9% year-on-year increase in net profit to Rs. 812 crore for the first quarter of FY2011, which was close to analyst estimates. Key highlights included a 40.2% rise in loan advances and an improvement in asset quality. The bank saw robust growth across parameters such as net interest income, deposits, and CASA ratio. While recommending a 'Buy' rating, analysts believe HDFC Bank is well positioned for continued high quality growth driven by its expansion plans and improving economic conditions.
Union bank result update 4 qfy2010 100510guest45ce0f1
Union Bank of India reported a 27.6% year-over-year increase in net profit for the fourth quarter of fiscal year 2010, beating expectations. Loan growth was 23.4% and deposit growth was 22.6% for the quarter. While asset quality pressures rose with an increase in the gross NPA ratio, the bank's net interest income grew 50.7% due to strong growth in current and savings deposits. The analyst recommends accumulating the stock due to the bank's profitable operations and competitive position, setting a target price of Rs318, an 8% upside from current levels.
Steel Authority of India reported a 1.7% decline in EBITDA to Rs. 1,843 cr for the first quarter of FY2011, below Angel Research's estimate, due to lower sales volume and higher staff costs. Net profit declined 11.3% to Rs. 1,177 cr for the same reasons. While steel prices increased, sales volume fell 15.5% from a year ago. Staff costs rose sharply due to additional provisions for employee benefits. Going forward, the company is expected to benefit from strong domestic demand, but capacity expansion benefits will only be seen after FY2012. Angel Research maintains a Neutral rating on the stock.
1) For 1QFY2011, Punj Lloyd posted disappointing results with net sales declining 41.7% year-over-year. Operating profits declined 56.1% and the company reported a net loss of Rs 30.6 crore.
2) The top-line was lower than expected, leading the company to downgrade its FY2011 and FY2012 revenue estimates. Problem orders like Ensus and Heera are now out of the picture.
3) While past performance was weak, the outlook is more positive as slow-moving orders have picked up and most challenges are now behind the company. With many negatives priced in, the analyst maintains a "Buy" rating on expectations of improved performance in F
Inox Leisure posted strong revenue growth in the fourth quarter aided by seat additions and a big budget movie lineup. However, higher expenses and film distribution shares led to a decline in operating margins. While profits grew on a recurring basis, margins contracted. The analyst maintains a 'Buy' rating, seeing upside from the Fame India acquisition, but lowers earnings estimates to account for higher interest costs.
Hotel Leela Venture reported a 24.9% year-over-year growth in net sales to Rs105.8 crore for the first quarter of FY2011, driven by higher occupancy rates and average room rates. Operating profit was up 67.5% to Rs31.6 crore due to fixed cost absorption, leading to a significant increase in net profit to Rs9.2 crore from Rs0.4 crore in the prior-year period. Going forward, the company expects to benefit from improving industry dynamics, but its current valuation remains higher than peers.
Sesa Goa reported strong growth in net sales and profits for the fourth quarter and full year of fiscal year 2010. Net sales grew 67.6% year-over-year for the quarter and 18.1% for the full year. Net profit increased 121.5% year-over-year for the quarter and 32.2% for the full year, exceeding estimates. However, the company missed its annual volume growth guidance of 20-25% due to delays in mining permits and cyclones impacting production. While near-term strength in iron ore prices is priced into the stock, uncertainties around mining regulations and surplus cash deployment lead the analyst to maintain a neutral rating.
Blue Star reported a 25.2% year-over-year increase in net sales for the first quarter of fiscal year 2011, though margins declined and profit fell. While sales grew across all segments, higher input costs and lower commission income caused operating margins to drop 281 basis points year-over-year to 9.2%. Net profit declined 10% year-over-year due to the margin pressure and a change in accounting policy. However, the company's order backlog grew nearly 15% and the outlook for large orders remains positive.
JK Lakshmi Cement reported a 21.1% year-over-year growth in net sales for the fourth quarter of fiscal year 2010, driven by a 21% increase in sales volume. However, operating profit declined by 8.7% due to a surge in raw material and other expenses. Net profit decreased by 32.6% to Rs. 70 crore on higher depreciation and interest costs. While sales volume and capacity are increasing, accelerated industry capacity additions may put pressure on prices and profitability going forward. The analyst maintains a "Buy" rating with a target price of Rs. 86 per share based on an EV/EBITDA multiple and estimated replacement cost valuations.
Titan Industries reported strong performance in the first quarter of fiscal year 2011 that was above expectations. Revenue grew 41.9% year-over-year driven by robust growth in the jewelry and watches segments. Operating and net profits increased 40.2% and 76.5% respectively. The company's jewelry segment saw a 49.6% revenue increase and 30% volume growth. The watches segment grew revenues 21.8% with improved sales of higher margin watches. While remaining positive on growth prospects, the analyst maintains a Neutral rating due to expensive valuations.
Sterlite Industries reported net revenue of Rs7,111cr for 4QFY2010, in line with estimates. Net profit was also in line with estimates at Rs1,381cr. Revenue growth was driven by higher metal prices, strong zinc and lead business performance, and higher by-product prices. Sterlite is well positioned to capitalize on strong metal demand through expansion plans and cost reductions. The company also announced a 1:1 bonus issue and stock split.
Jain Irrigation Systems reported financial results for the fourth quarter of fiscal year 2010 that were ahead of estimates. Revenue grew 37% year-over-year driven by strong growth in the micro irrigation systems segment. Net profit increased significantly due to foreign exchange gains, while adjusted net profit grew 40% on higher sales and stable margins. However, margins were slightly lower than the previous year due to higher raw material costs for onions. While growth is expected to continue across segments, the stock price is nearing fair value, leading to a downgrade from "Buy" to "Accumulate."
Indian markets fell for the sixth straight day, with the NSE Nifty losing over 400 points and the BSE Sensex dropping more than 1400 points. The declines were driven by continued selling pressure from foreign institutional investors taking profits, as well as concerns over inflation, an upcoming interest rate hike, and policy stalemate in the central government. Most global markets also declined, with US stocks ending lower due to worries about a possible bailout of Portugal. Domestically, corporate news included Reliance Life Insurance announcing skills training for insurance agents and Reliance Power signing an agreement for a 100 MW solar power project.
The document provides a market commentary and analysis from Valuehunt on January 4th, 2013. It includes the P/E ratio of the BSE Sensex index, holdings in Valuehunt's model portfolio, global market indices performance, sectoral indices in India, notable gaining and losing stocks in the Nifty, and headlines from business publications. The document also discusses two companies undergoing demergers.
Elecon Engineering reported a 15% rise in revenue for the first quarter of fiscal year 2011. While operating margins declined slightly, profit grew 57% due to a 32% drop in interest costs. The company has a robust order backlog of Rs1,582 crore, offering high revenue visibility. Going forward, recovery in the industrial sector and opportunities in material handling equipment are expected to drive continued growth for Elecon Engineering.
The Indian stock markets fell sharply on May 3, 2011, with the BSE Sensex losing 463 points and the NSE Nifty falling 136 points. The RBI increased the repo rate by 50 basis points to 7.25% to contain inflation. Rate sensitive sectors like banking, real estate and auto declined the most. Globally, most US stocks fell and commodity prices declined. The Indian rupee closed lower at Rs. 44.34 against the US dollar. Corporate earnings and other news like projects awarded, acquisitions and investments were also reported.
Sadbhav Engineering reported a 42% increase in net sales and 83.8% increase in net profit for the first quarter of fiscal year 2011 compared to the previous year. The company saw robust growth due to a rise in order book over the last few quarters and has guided for over 35% revenue growth over the next 12 months. However, the analyst downgraded the stock to Reduce due to rich valuations and concerns over potential execution challenges due to a record high order backlog.
State Bank of India reported a 25.1% year-over-year increase in net profit for the first quarter of fiscal year 2011, exceeding analyst estimates. Net interest income grew 45.4% year-over-year due to a rise in low-cost deposits and narrowing of net interest margin. Loan growth was 20.4% year-over-year while deposit growth was 6.8% year-over-year. Non-performing assets rose slightly during the quarter but asset quality remained reasonable with net NPA ratio of 1.7%. The analyst maintains an "Accumulate" rating on the stock.
Punjab National Bank reported flat net profit of Rs1,068cr for 1QFY2011, higher than estimates due to strong growth in net interest income and non-interest income. However, asset quality pressures increased with gross and net NPAs rising significantly. Total advances grew 24.6% year-over-year driven by growth in the agriculture, SME, and corporate segments. Net interest margins declined slightly due to higher cost of deposits outpacing growth in asset yields. The bank increased provisions for NPAs in the quarter and restructured an additional Rs878cr in loans.
Corporation Bank reported a 27.8% increase in net profit for the first quarter of fiscal year 2011 compared to the same period last year, above analysts' estimates. Net interest income grew 49.2% driven by strong loan growth and an improvement in the credit-deposit ratio. However, asset quality deteriorated with gross NPAs rising 11.6% sequentially. Going forward, maintaining the loan growth rate will be challenging in a rising interest rate environment given the bank's regional operations and lower CASA ratio compared to peers.
1) Indian Bank reported an 11% increase in net profit for 1QFY2011 compared to the previous year, which was above estimates. However, gross NPAs sharply increased.
2) Advances and deposits grew by 31% and 19% respectively year-over-year. Net interest income declined slightly sequentially despite higher interest payments on savings deposits.
3) Going forward, the bank's net interest margins may decline in a rising interest rate environment given its moderate CASA ratio of 33%, and asset quality will need to be monitored in the next two quarters.
Indian Overseas Bank reported a net profit decline of 33.6% year-over-year but a rise of 57.2% quarter-over-quarter to Rs200cr for 1QFY2011, above estimates. While advances grew 7.9% year-over-year, deposits increased 8.6% year-over-year. Asset quality pressures eased with gross and net NPA ratios improving, and provisions declining sharply. However, non-interest income declined due to muted loan growth and treasury gains. Operating expenses rose 15.2% year-over-year.
HDFC Bank reported a 33.9% year-on-year increase in net profit to Rs. 812 crore for the first quarter of FY2011, which was close to analyst estimates. Key highlights included a 40.2% rise in loan advances and an improvement in asset quality. The bank saw robust growth across parameters such as net interest income, deposits, and CASA ratio. While recommending a 'Buy' rating, analysts believe HDFC Bank is well positioned for continued high quality growth driven by its expansion plans and improving economic conditions.
South Indian Bank reported net profits of Rs. 58 crore for the first quarter of fiscal year 2011, in line with analyst estimates. Business growth was strong, with advances growing 33.6% year-over-year and deposits growing 25.1% year-over-year. Asset quality remained stable with gross and net NPA ratios of 1.3% and 0.4% respectively. Operating expenses grew 47.1% sequentially but the bank plans to control expenses going forward. The analyst maintains a Neutral rating on the stock as it trades at 6.8 times estimated fiscal year 2012 earnings per share of Rs. 28.5 per share.
Union Bank of India reported a 36% increase in net profit for the first quarter of fiscal year 2011 compared to the same period last year. Key highlights included steady loan growth of 30% year-over-year and improving asset quality with stable gross NPA ratios. However, non-interest income declined by 18% year-over-year due to lower treasury gains and fee income. Operating expenses grew 36% year-over-year driven by a 45% rise in employee costs. Overall, the results were better than estimates due to lower provisioning expenses.
ICICI Bank reported a 16.8% year-over-year increase in net profit for 1QFY2011, which was in line with analyst estimates. While advances grew 1.8% quarter-over-quarter, they declined 6.9% year-over-year due to repayments in retail and short-term corporate loans. Non-performing assets stabilized with a decline in retail loan slippages, and the provision coverage ratio improved. Operating expenses declined 4% year-over-year, though the cost-to-income ratio rose due to muted revenue growth. The analyst maintains a buy rating on expectations of lower NPA provisions driving higher returns going forward.
ICICI Bank reported a 16.8% year-over-year increase in net profit for the first quarter of fiscal year 2011, which was in line with analyst estimates. While advances increased 1.8% quarter-over-quarter, they declined 6.9% year-over-year due to repayments in retail and short-term corporate loans. Non-performing assets stabilized with a declining trend in retail loan slippages. The bank maintained a strong capital adequacy ratio of 20.2% with a substantial Tier-1 component of 14.0%, positioning it well for growth.
Yes Bank reported a 56.3% year-over-year increase in net profit for the first quarter of fiscal year 2011. Net profit was Rs. 156 crore, higher than the estimated Rs. 139 crore due to lower loan loss provisions. Strong loan and deposit growth continued, with advances up 18.3% quarter-over-quarter and deposits up 12.8% quarter-over-quarter. However, branch expansion remained behind schedule. The analyst maintains a Neutral rating on the stock due to high execution risks in achieving growth implied by current valuations, rising funding costs, and challenges in building a retail franchise.
Axis Bank has announced its 1QFY2011 results. Net profit grew 32.0% to Rs742cr, better than estimates due to higher than expected net interest income. Advances grew robustly by 39.1% year-over-year driven by corporate lending. Deposits also increased strongly by 33.8% year-over-year. While net interest margins declined, operating performance was strong with stable asset quality. The analyst maintains an 'Accumulate' rating and target price of Rs1,477, implying 10% upside.
Dena Bank reported a 20.7% increase in net profit for the first quarter of fiscal year 2011 compared to the same period the previous year, ahead of analyst estimates. Net interest income grew 43.9% year-over-year due to higher loan growth, especially in retail, SME, and agriculture loans. However, gross non-performing assets also increased sequentially. The bank maintained a strong capital adequacy ratio of 11.8% and expects the ratio to increase further with an expected capital infusion of Rs. 600 crore from the government. The analyst maintains a "Buy" rating on the stock with a target price of Rs. 114 based on expected earnings growth and an appropriate price-to-book
Corporation Bank reported a 19.9% rise in net profit to Rs312cr for 4QFY2010, ahead of expectations. Advances grew strongly by 30.3% to Rs63,203cr due to robust deposit growth in 3QFY2010. Asset quality improved with the gross NPA ratio declining to 1% and the provision coverage ratio rising to 70%. While core fee income growth was robust, overall non-interest income declined due to lower treasury gains. Going forward, maintaining the growth rate will be challenging in a rising interest rate environment given the bank's regional operations.
Federal Bank reported a 3.3% year-over-year decline in net profit to Rs132cr for the first quarter of fiscal year 2011, lower than estimates due to lower non-interest income and higher provisions. Asset quality pressures emerged as gross and net NPAs increased substantially from the previous quarter. Advances and deposits growth of 16.6% and 10.2% respectively lagged industry averages. CASA deposits grew faster than overall deposits. The bank maintained an Accumulate rating based on attractive valuation and strong core returns, though earnings quality faced pressure from rising NPAs.
Bharat Forge reported strong results for 1QFY2011 with net sales growing 75.7% year-over-year to Rs 630.1 crore, beating estimates. Operating margins improved significantly to 25.2% due to lower raw material costs and higher utilization levels. Net profit was Rs 59.4 crore, exceeding expectations due to improved volumes and operating leverage. The analyst recommends accumulating the stock given the better-than-expected performance and revised upward estimates.
Subros reported an 11.6% increase in net sales for the first quarter of FY2011 compared to the same period last year, aided by a 13.8% growth in volumes. Operating profit rose 17.3% while net profit jumped 117.1% due to lower raw material costs and expansion in operating margins. The company maintained its outlook for 15% annual volume growth over the next two years but expects pricing pressure to limit revenue growth to around 10% annually. The analyst maintains a 'Buy' rating with a target price of Rs60 per share based on projected earnings growth and reasonable valuation.
Union bank result update 4 qfy2010 100510Angel Broking
Union Bank of India reported a 27.6% year-over-year increase in net profit for the fourth quarter of fiscal year 2010, beating expectations. Loan growth was 23.4% and deposit growth was 22.6% for the quarter. While asset quality pressures rose with an increase in the gross NPA ratio, the bank's net interest income grew 50.7% due to strong growth in current and savings deposits. The analyst recommends accumulating the stock due to the bank's profitable operations and competitive position, setting a target price of Rs318, an 8% upside from current levels.
- Axis Bank reported a 38.3% year-over-year increase in net profit to Rs. 735 crore for 2QFY2011, slightly better than the analyst's estimate of Rs. 706 crore.
- Strong operating performance continued as advances grew 36.5% year-over-year and deposits increased 35.7% year-over-year. Net interest income increased 40.5% year-over-year.
- Asset quality was stable with gross and net NPA ratios of 1.1% and 0.3% respectively. The analyst maintains an "Accumulate" recommendation on Axis Bank.
1) Jain Irrigation Systems (JISL) reported 27% year-over-year revenue growth to Rs726 crore for the first quarter of FY2011, which was slightly ahead of estimates.
2) EBITDA margin of 23% exceeded expectations and adjusted profit after tax grew 52% year-over-year despite being 9% below estimates.
3) The micro irrigation systems and PVC sheet segments saw particularly strong growth of 44% and 61% respectively during the quarter, driving overall results.
The Indian markets are expected to open higher, tracking gains in most Asian markets. Spain has asked for a bailout of up to €100 billion for its banking system. Chinese exports grew more than expected in May. In India, shares extended gains for a fifth session despite weak global cues as major central banks held off on additional stimulus. The key support and resistance levels for the Nifty are 5,023 and 5,114 respectively. L&T has bagged orders worth Rs. 483 crore to build commercial vessels in Qatar. Vedanta Resources has acquired a 24.5% stake in Raykal Aluminium for Rs. 201 crore.
Axis Bank reported a 27.0% year-over-year increase in net profit to Rs. 942 crore for the first quarter of fiscal year 2012, in line with analyst estimates. Business growth momentum slowed as advances declined 7.4% quarter-over-quarter and deposits fell 3.0% quarter-over-quarter, moderating the bank's cash-deposit ratio to 40.5% from 41.1% last quarter. However, asset quality remained healthy with slippage ratio declining to 0.8% and gross and net NPA ratios stable.
1) For 1QFY2012, Electrosteel Castings reported 16.4% sales growth but margins declined due to higher raw material costs. EBITDA fell 18.2% and net profit declined 7.2%.
2) While sales volumes grew, costs increased more due to a rise in raw material costs as a percentage of sales.
3) The company maintains a buy recommendation due to initiatives in steelmaking and backward integration that should lower costs starting in FY2013 and valuation remains attractive.
1) For 1QFY2012, Persistent Systems reported revenues of ₹224 crore, up 5.2% over the previous quarter and 23.6% over the same period last year.
2) EBITDA was ₹40 crore, up 5.3% over the previous quarter but margins declined.
3) PAT was ₹28 crore, down 16.8% over the previous quarter due to higher taxes.
4) Management maintained revenue guidance of 29% growth for FY2012 and expects PAT to remain flat despite higher tax rates.
HT Media reported a 22.7% year-over-year increase in revenue to ₹494 crore for the first quarter of FY2012. Revenue was also up 5.8% quarter-over-quarter. Advertising revenue grew 17% year-over-year, with 18% growth in English and 15% growth in Hindi. Operating profit rose 11.8% year-over-year to ₹87.8 crore due to higher other income and lower tax rates, although operating margins contracted by 174 basis points. The company maintained its Accumulate rating based on expectations of continued revenue growth and margin expansion.
The summary is:
1) The derivative report analyzes the performance of the Nifty futures, options, and key stocks from the previous trading session on July 18, 2011.
2) It provides details on changes in open interest, premium levels, volatility, and turnover for various derivatives contracts.
3) Trading strategies and technical analysis is also given for some stocks along with risk-reward profiles of sample spreads trades for the Nifty.
The market ended lower, with the Sensex and Nifty closing down 0.3%. Mid- and small-cap indices closed higher. Select heavyweights like Hindalco Industries and BHEL gained 1-3%, while TCS and Tata Motors lost 1-2%. In corporate news, Motherson Sumi Systems agreed to acquire an 80% stake in Peguform for €141.5 million. HDFC Bank, Cadila Healthcare, Crompton Greaves, and Ashok Leyland are scheduled to announce their quarterly results. The trend for the day will be decided by whether Nifty trades above or below the levels of 18,533/5,572 in early trade.
- GSM subscriber additions in India continued their declining trend in June 2011, with net additions of 9.6 million, down 10% from the previous month.
- All major operators except BSNL reported a drop in subscriber additions. Bharti and Vodafone each added 2.1 million subscribers.
- The total GSM subscriber base reached 598.8 million in June 2011, with Bharti, Vodafone, Idea and BSNL maintaining their major market shares.
The document provides a technical analysis of the Indian stock market indices Sensex and Nifty for the week of July 16, 2011. It summarizes that the indices declined over 1.5% for the week and are currently trading in a range between 18,326/5496 on the downside and 19,132/5740 on the upside. It notes that a break above or below this range would dictate the direction of the upcoming trend. The analysis also lists pivot levels for 50 Nifty stocks to watch in the coming week.
The document provides a summary of derivative market activity in India for July 18, 2011. Key points include:
- Nifty futures open interest increased 0.67% while Mini Nifty increased 3.48% as the market closed at 5581.10
- Nifty July futures closed at a premium of 5.85 points and August futures at a premium of 22.60 points
- Implied volatility of at-the-money options decreased from 18% to 17.3%
- Total open interest in the market was Rs. 135,158 crore with stock futures open interest at Rs. 34,675 crore.
The indices opened flat but traded choppily throughout the day. Metal, auto and realty stocks declined while IT stocks gained. The indices are currently trading in a range between 18,326-18,810/5496-5653 on the downside and 19,132-19,094/5740-5700 on the upside. A break above these resistance levels could lead to further gains while a break below support could result in losses extending to 17,805-17,950/5350-5400. Pivot levels for 50 Nifty stocks are provided.
- The key Indian stock indices declined slightly, with the Sensex and Nifty closing down 0.3%.
- GSM subscriber additions in India continued their declining trend in June across most major operators such as Idea, Bharti Airtel, and Vodafone. Total GSM subscriber addition was 9.6 million, down 10% from the previous month.
- Tata Motors reported flat annual global sales growth in June 2011 compared to the previous year.
- South Indian Bank reported a 41.2% year-over-year increase in net profit to Rs. 82 crores for the first quarter of fiscal year 2012, slightly below analyst estimates.
- Business growth remained strong, with advances growth of 31.2% and deposits growth of 35.5% year-over-year. However, net interest margins compressed by 29 basis points sequentially to 2.8% due to a sharp rise in the bank's cost of deposits.
- Non-interest income was boosted by treasury gains, but fee income growth was modest. Asset quality was stable with gross and net NPAs rising marginally, and provision coverage at a comfortable 73.1%.
Bajaj Auto reported marginally lower-than-expected results for the first quarter of fiscal year 2012, with net sales growth of 22.8% year-over-year driven by a 17.7% increase in volumes. However, operating margins contracted by 145 basis points quarter-over-quarter to 19.1% due to a 150 basis point increase in raw material costs. As a result, net profit grew by 20.5% year-over-year to ₹711 crore, which was slightly below analyst estimates. Going forward, the analyst expects further margin pressure and has revised downward its earnings estimates for fiscal years 2012 and 2013 to factor in higher raw material costs and changes to export incentives.
1) Tata Consultancy Services (TCS) reported strong results for the first quarter of fiscal year 2012, outperforming expectations with revenue growth of 6.3% over the previous quarter and 31.4% over the same quarter of the previous fiscal year.
2) A key highlight was 7.4% quarter-over-quarter growth in business volumes. While profit margins declined due to wage hikes, net profit remained flat due to foreign exchange gains.
3) Management maintained a positive outlook, highlighting strong demand environment and deal pipeline, and expects pricing increases later in the fiscal year.
The document summarizes the Indian stock market outlook and performance on July 15, 2011. It reports that domestic indices closed with modest gains of 0.1-0.4%, while global indices declined. Wholesale price inflation in India rose to 9.44% in June 2011, above estimates and persisting above 9% for seven months, driven by increases in primary articles and fuel costs. Key benchmark levels are identified for determining if the market may continue rallying or correct in the near term.
The summary is:
1) The derivative report analyzes the movement in Nifty futures, options, and individual stocks between July 14-15, 2011.
2) Nifty futures open interest decreased while mini Nifty open interest increased as the market closed at 5599.80.
3) Implied volatility of at-the-money options increased from 17.6% to 18%.
The Sensex and Nifty indices opened lower and traded with volatility, closing marginally lower. On the sectoral front, Realty, Banks and Healthcare gained while IT and FMCG fell. The advance-decline ratio favored advancing stocks. On the daily chart, prices tested but did not close above the downward gap area of 18,679-18,589/5,601-5,580 levels. Immediate resistance is seen at 18,735/5,633, while 18,449/5,541 is crucial support.
1) Infosys reported modest revenue growth of 3.2% qoq for 1QFY2012. EBITDA and margins declined due to wage hikes.
2) Guidance for 2QFY2012 revenue growth was lower than expected at 3.5-5% qoq. Annual revenue growth guidance was unchanged.
3) The analyst revised EPS estimates down and cut the target price to INR 3,200 due to macro concerns and muted guidance.
This document summarizes a derivative report from India Research dated July 13, 2011. Some key points:
- The Nifty futures open interest increased 0.51% while Minifty futures open interest rose 8.2% as the market closed at 5526.15.
- Implied volatility of at-the-money options increased from 18% to 19.75%. PCR-OI decreased from 1.20 to 1.15.
- Total open interest of the market is Rs. 125,816 crore and stock futures open interest is Rs. 33,500 crore.
- FII were net sellers of Rs. 969 crore in the cash market segment. Put-call
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A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
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1. 1QFY2011 Result Update | Banking
August 3, 2010
Bank of India NEUTRAL
CMP Rs437
Performance Highlights Target Price -
Particulars (Rs cr) 1QFY11 4QFY10 % chg (qoq) 1QFY10 % chg (yoy) Investment Period -
NII 1,740 1,552 12.2 1,301 33.8
Pre-prov. profit Stock Info
1,411 1,275 10.6 1094 29.0
PAT 725 428 69.5 584 24.1 Sector Banking
Source: Company, Angel Research Market Cap (Rs cr) 22,939
Beta 0.9
Bank of India posted net profit growth of 24.1% yoy and robust growth of 69.5%
52 Week High / Low 475/303
qoq to Rs725cr for 1QFY2011. Robust operating performance and a sharp
Avg. Daily Volume 215,561
decline in provisions because of improvement in asset quality were the key
Face Value (Rs) 10
highlights of the result.
BSE Sensex 18,115
Asset quality improves: The advances grew 19.6% yoy to Rs1,76,825cr and Nifty 5,440
deposits grew 19.8% yoy to Rs2,33,668cr. NIM improved to 2.89% (2.57% in Reuters Code BOI.BO
4QFY2010 and 2.42% in 1QFY2010), aided by a 26bp improvement in yield on Bloomberg Code BOI@IN
advances and an 8bp reduction in cost of funds during 1QFY2011. As a result,
NII grew by 33.8% yoy to Rs1,740cr. The domestic CASA ratio improved to 32.6%
(31.8% in 4QFY2010). Asset quality improved, with gross NPA and net NPA ratios Shareholding Pattern (%)
at 2.7% (2.9% in 4QFY2010) and 1.2% (1.3% in 4QFY2010), respectively. Gross Promoters 64.5
slippages stood at Rs618cr (slippage ratio of 1.7% compared to 2.9% in FY2010), MF / Banks / Indian Fls 14.9
out of which Rs130cr was related to the Agriculture Debt Relief Scheme. FII / NRIs / OCBs 14.5
Restructured assets declined from Rs10,613cr in 4QFY2010 to Rs10,128cr in
Indian Public / Others 6.1
1QFY2011 (5.7% of advances and 68% of the net worth). There was a slippage
of Rs72cr (down significantly from the peak level of Rs839cr in 2QFY2010) from
restructured assets. Abs. (%) 3m 1yr 3yr
Outlook and valuation: At the CMP, the stock is trading at 6.9x FY2012E EPS of Sensex 4.2 13.8 19.7
Rs63.1 and 1.33x FY2012E ABV of Rs329. On the back of stronger than expected Bank of India 14.2 30.1 78.4
operating performance during the quarter, we have revised the earnings
estimates upwards. However, due to the recent run-up in the stock, the valuations
are trading close to our target multiple of 1.30x FY2012E ABV for the stock,
hence we maintain a Neutral rating on the stock.
Key Financials
Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
NII 5,499 5,756 7,187 8,326
Vaibhav Agrawal
% chg 30.0 4.7 24.9 15.9
022 – 4040 3800 Ext: 333
Net Profit 3,007 1,741 2,683 3,318
vaibhav.agrawal@angeltrade.com
% chg 49.7 (42.1) 54.1 23.6
NIM (%) 2.8 2.4 2.5 2.4 Amit Rane
EPS (Rs) 57.2 33.1 51.0 63.1 022 – 4040 3800 Ext: 326
P/E (x) 7.6 13.2 8.6 6.9 amitn.rane@angeltrade.com
P/ABV (x) 2.0 2.0 1.6 1.3
Shrinivas Bhutda
RoA (%) 1.5 0.7 0.9 0.9
022 – 4040 3800 Ext: 316
RoE (%) 29.2 14.2 19.4 20.5 shrinivas.bhutda@angeltrade.com
Source: Company, Angel Research
Please refer to important disclosures at the end of this report 1
2. Bank of India | 1QFY2011 Result Update
Exhibit 1: 1QFY2011 performance
% chg % chg
Particulars (Rs cr) 1QFY2011 4QFY2010 1QFY2010
(qoq) (yoy)
Interest earned 4,822 4,525 6.6 4,378 10.1
Interest expenses 3,081 2,973 3.6 3,077 0.1
NII 1,740 1,552 12.2 1,301 33.8
Non-interest income 586 723 (19.0) 646 (9.3)
Total income 2,326 2,275 2.3 1,946 19.5
Operating expenses 916 999 (8.4) 853 7.4
Pre-prov. profit 1,411 1,275 10.6 1,094 29.0
Provisions & cont. 386 809 (52.3) 223 72.7
PBT 1,025 466 119.7 870 17.7
Prov. for taxes 300 39 678.0 286 4.8
PAT 725 428 69.5 584 24.1
EPS (Rs) 13.8 8.1 69.5 11.1 24.1
Cost-to-income ratio (%) 39.4 43.9 43.8
Effective tax rate (%) 29.2 8.3 32.9
Net NPA (%) 1.18 1.3 0.8
Source: Company, Angel Research
Exhibit 2: 1QFY2011 Actual v/s Angel estimates
Particulars (Rs cr) Actual Estimates Var. (%)
NII 1,740 1,440 20.9
Non-interest income 586 648 (9.6)
Total income 2,326 2,088 11.4
Operating expenses 916 955 (4.1)
Pre-prov. profit 1,411 1,133 24.5
Provisions & cont. 386 398 (3.0)
PBT 1,025 735 39.4
Prov. for taxes 300 244 22.8
PAT 725 491 47.7
Source: Company, Angel Research
August 3, 2010 2
3. Bank of India | 1QFY2011 Result Update
Advances and deposits growth improve
At the end of 1QFY2011, advances grew 19.6% yoy to Rs1,76,825cr and deposits
grew 19.8% yoy to Rs2,33,668cr. The domestic loan book grew by 19.6% yoy to
Rs1,39,359cr and the overseas loan book registered growth of 19.7% yoy to
Rs37,466cr.
Domestic loans were driven by corporate loans and the SME segment, which grew
by 30.3% and 21.3% yoy, respectively. We have factored in yoy growth of 20.0%
in advances for the bank in FY2011E, based on the ongoing pick-up in credit
demand and expectations of large, unutilised limits getting increasingly drawn
down, going forward, as working capital requirements increase.
Exhibit 3: Trend in advances and deposits
Advances Deposits Credit-Deposit ratio (RHS)
(Rs cr) (%)
250,000 81
200,000
78
150,000
75
100,000
72
50,000
- 69
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research
Exhibit 4: 1QFY2011 – Domestic advances break-up
Corporates
Business Auto
54% Education
Mortgage 1%
1%
1%
Others
2%
Retail
11%
Agri
SME 13% Housing
22% 6%
Source: Company, Angel Research
August 3, 2010 3
4. Bank of India | 1QFY2011 Result Update
NIMs improve sequentially
Bank of India’s NIM improved to 2.89% in 1QFY2011 (2.57% in 4QFY2010 and
2.42% in 1QFY2010), aided by a 26bp improvement in yield on advances and an
8bp reduction in cost of funds during the quarter. As a result, NII grew by 33.8%
yoy to Rs1,740cr. The bank’s domestic CASA ratio improved to 32.6% (31.8% in
4QFY2010). CASA deposits increased by 26.4% yoy, driven by yoy growth of
19.6% and 28.5% in current and savings deposits, respectively.
Exhibit 5: Trend in spreads
Particulars (%) 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11
Cost of deposits 5.81 5.59 5.26 4.79 4.79
Yield on advances 9.27 8.97 8.41 8.12 8.38
Yield on investments 7.06 7.14 7.36 6.98 6.90
Yield on funds 7.69 7.66 7.35 6.90 6.96
Cost of funds 5.40 5.26 4.90 4.53 4.45
Reported NIM 2.42 2.57 2.60 2.57 2.89
Source: Company, Angel Research
Exhibit 6: Trend in reported NIM
(%) Reported NIM
3.20
2.89
2.80
2.57 2.60 2.57
2.42
2.40
2.00
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research
Non-interest income declines
Total non-interest income declined by 9.3% yoy to Rs586cr due to lower treasury
gains (down 16.4% yoy). However, non-interest income excluding treasury grew by
19.7% yoy. We expect total non-interest income to decline by 6.4% in FY2011E.
Exhibit 7: Break-up of non-interest income
Particulars (Rs cr) 1QFY11 4QFY10 % chg (qoq) 1QFY10 % chg (yoy)
CEB 250 334 (25.2) 263 (5.0)
Treasury 231 194 18.7 276 (16.4)
Recoveries 37 94 (60.5) 33 11.8
Others 68 102 (32.6) 74 (7.6)
Total 586 723 (19.0) 646 (9.3)
Source: Company, Angel Research
August 3, 2010 4
5. Bank of India | 1QFY2011 Result Update
Exhibit 8: Trend in non-interest income mix
(Rs cr) CEB Treasury Recoveries Others
1,200
900
600 672
342 194
276 283 212 231
300 181 120
230 264 287 311 263 248 252 334 250
-
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research
Improving asset quality
Gross NPAs of the bank decreased by 1.8% sequentially and by 6.6% yoy to
Rs4,795cr in 1QFY2011. Gross NPA and net NPA ratios stood at 2.7% (2.9% in
4QFY2010) and 1.2% (1.3% in 4QFY2010), respectively. Gross slippages stood at
Rs618cr (slippage ratio of 1.7%), out of which Rs130cr was related to the
Agriculture Debt Relief Scheme. The NPA provision coverage ratio including
technical write-offs improved from 65.5% in 4QFY2010 to 68.3% at the end of
1QFY2011. Restructured assets declined from Rs10,613cr in 4QFY2010 to
Rs10,128cr in 1QFY2011 (5.7% of advances and 68.0% of net worth). There was
a slippage of Rs72cr (down significantly from the peak level of Rs839cr in
2QFY2010) from restructured assets.
Exhibit 9: Trend in asset quality
Gross NPAs Net NPAs Coverage ratio (RHS)
(Rs cr) (%)
6,000 80
4,500
65
3,000
50
1,500
- 35
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research, Note: NPA coverage excluding technical write-offs till
4QFY2009
Operating costs under control
Total operating expenses increased by 7.4% yoy and declined by 8.4% sequentially
to Rs916cr. The cost-to-income ratio stood at 39.4%, lower than its eight-quarter
average of 40.2%. Till date, the bank has made excess provisions of Rs190cr in
employee costs, which are expected to provide a cushion against future liabilities.
August 3, 2010 5
6. Bank of India | 1QFY2011 Result Update
Exhibit 10: Trend in productivity
(%) Cost-to-Income ratio
60.0
43.8 45.3 43.9
39.6 42.2
45.0 38.6 39.4
36.5
31.5
30.0
15.0
-
1QFY09
2QFY09
3QFY09
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research
Sufficient capital adequacy
The bank is well capitalised with a CAR of 13.3% and Tier-I capital of 8.5%
(forming 64% of the total CAR). The bank has adequate headroom to raise
additional Tier-II capital.
Exhibit 11: Comfortable capital adequacy
(%) Tier-I CAR Tier-II CAR
15.0
12.0 4.4 4.3
4.1 4.1 4.5 4.8
9.0
6.0
8.9 9.2 9.2 9.4 8.5 8.5
3.0
0.0
4QFY09
1QFY10
2QFY10
3QFY10
4QFY10
1QFY11
Source: Company, Angel Research
August 3, 2010 6
7. Bank of India | 1QFY2011 Result Update
Investment Arguments
Lower provisions to drive RoE
During the crisis, Bank of India faced severe asset quality pressure with slippages
rate of 2.9% in FY2010 (from 1.8% in FY2009.) As a result, the NPA
provision/assets increased to 0.7% in FY2010 from 0.3% in FY2009, thereby
pressurising the bank’s RoE. However, as observed in 1QFY2011 results, the bank
has overcome the worst of the asset quality pressures. Further, with an
improvement in the operating environment, we expect the NPA provision/assets to
decline sharply to 0.4% by FY2012E, leading to RoE of 20.5% by FY2012E from
14.2% in FY2010.
Strong fee-income potential with moderate funding mix
Bank of India’s international operations contribute a substantial 21.2% to
advances. The bank’s international operations enable a wider spectrum of fee-
based services to domestic corporate and retail customers, foreign currency fund-
based services to Indian corporates and savings products to PIO clients abroad.
The bank also has significant forex operations (one of the largest amongst
domestic banks in FY2010).
The bank’s moderate funding mix (CASA ratio at 32.6% of domestic deposits) and
traction in core fee income are expected to support a relatively high 19% CAGR in
pre-provisions profits compared to peers over FY2010–12E.
Efficient capital management aiding RoE outlook
Bank of India’s CAR is comfortable at 13.3%, with an 8.5% Tier-1 component
reinforced by strong internal generation that leaves comfortable headroom on
Tier-II sources. Leverage is amongst the highest within peers, aided by relatively
higher use of Tier-1 bonds and revaluation reserves. With government holding at
64%, the bank is not facing pronounced near-term constraints on the equity front.
Outlook and valuation
At the CMP, the stock is trading at 6.9x FY2012E EPS of Rs63.1 and 1.33x
FY2012E ABV of Rs329. On the back of stronger than expected operating
performance during the quarter, we have revised the earnings estimates upwards.
However, due to the recent run-up in the stock, the valuations are trading close to
our target multiple of 1.30x FY2012E ABV for the stock, hence we maintain a
Neutral rating on the stock.
August 3, 2010 7
8. Bank of India | 1QFY2011 Result Update
Exhibit 12: Key assumptions
Earlier estimates Revised estimates
Particulars (%)
FY2011E FY2012E FY2011E FY2012E
Credit growth 18.0 18.0 20.0 18.0
Deposit growth 18.0 17.0 18.0 17.0
CASA ratio 27.6 27.3 27.6 27.3
NIM 2.3 2.2 2.5 2.4
Other income growth (4.7) 17.0 (6.4) 16.9
Growth in staff expenses 12.0 14.0 8.0 14.0
Growth in other expenses 12.0 14.0 8.0 14.0
Slippages 2.4 2.1 2.3 2.0
Coverage ratio 71.3 73.3 70.2 70.1
Treasury gain/(loss) (% of investments) 0.2 0.1 0.2 0.1
Source: Company, Angel Research
Exhibit 13: Change in estimates
FY2011E FY2012E
Particulars (Rs cr) Earlier Revised Earlier Revised
% chg % chg
estimates estimates estimates estimates
NII 6,622 7,187 8.5 7,651 8,326 8.8
Non-interest income 2,493 2,450 (1.7) 2,918 2,865 (1.8)
Total income 9,115 9,637 5.7 10,569 11,191 5.9
Operating expenses 4,108 3,961 (3.6) 4,683 4,516 (3.6)
Pre-prov. profit 5,007 5,676 13.4 5,885 6,676 13.4
Provisions & cont. 1,829 1,659 (9.3) 1,810 1,648 (8.9)
PBT 3,178 4,016 26.4 4,076 5,027 23.3
Prov. for taxes 1,055 1,333 26.4 1,386 1,709 23.3
PAT 2,124 2,683 26.4 2,690 3,318 23.3
Source: Company, Angel Research
Exhibit 14: P/ABV band
Price 0.4x 0.8x 1.2x 1.6x 2x
(Rs)
700
600
500
400
300
200
100
0
Aug-05
Jun-06
Jan-00
Jul-03
May-04
Jan-06
Jul-08
May-09
Dec-03
Dec-08
Apr-07
Apr-10
Oct-04
Feb-03
Mar-05
Feb-08
Feb-11
Sep-02
Sep-07
Sep-10
Nov-06
Nov-09
Source: Company, Angel Research
August 3, 2010 8
12. Bank of India | 1QFY2011 Result Update
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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Disclosure of Interest Statement Bank of India
1. Analyst ownership of the stock No
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Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)
August 3, 2010 12