Summary
of Contents
STOCK UPDATE
ICICI Bank
Cluster: Apple
Green
Recommendation: Buy
Price target: Under
review
Current market price: Rs866
Q4FY2007
results—first-cut analysis
Result
highlights
-
ICICI Bank's
Q4FY2007 results have been below expectations. Its profit after
tax has grown by 4% year on year (yoy) and declined by 9% quarter
on quarter (qoq) to Rs825 crore compared with our estimate of
Rs1,004 crore. The numbers are lower mainly on account of a lower
than expected non-interest income.
-
We had
expected a much higher non-interest income due to the National
Stock Exchange (NSE) stake sale that was likely to fetch around
Rs500 crore and a sustained robust fee income growth witnessed
during the previous quarters. However, despite the NSE stake sale
the total treasury income stood at Rs446 crore adjusted for the
marked-to-market loss on the corporate bond portfolio. This
implies an insignificant contribution from any other treasury
income source. The core fee income was also lower with a
sequential growth of only 6% compared with 18% and 15% sequential
growth witnessed in the previous two quarters.
-
The core
operations were in line with expectations. The net interest income
was up by 36% yoy and 10% qoq to Rs1,875 crore compared with our
estimate of Rs1,848 crore. The net interest margin (NIM) for
Q4FY2007 stood at 2.66% compared with 2.6% in Q3FY2007 and 2.79%
in Q4FY2006. However, excluding the one-time cash reserve ratio
interest, we feel there would be a sequential decline of five
basis points in the NIM.
-
The operating
profit was up by 39% yoy and 4% qoq to Rs2,054 crore. However, the
core operating profit increased by 34% yoy but declined by 3% qoq.
Provisions showed an increase of 91% yoy and 28% qoq to Rs1,142
crore mainly due to a one-time higher provision (Rs310 crore) on
standard assets on account of an increase in the provisioning
requirements by the Reserve Bank of India from 1% to 2% on certain
categories of standard assets.
-
The business
of the bank showed some moderation, deposits increased by 40% yoy
and 17% qoq to Rs230,510 crore. Advances increased by 34% to
Rs195,866 crore. Retail advances were up 39% yoy and 8% qoq to
Rs127,689 crore.
-
The asset
quality although at comfortable levels has continued to
deteriorate with the gross non-performing assets (NPAs) up by
Rs500 crore to Rs4,850 crore on a sequential basis. However, the
net NPAs declined to 0.98% from 1.07% on a sequential
basis.
-
The capital
adequacy ratio (CAR) stood at 11.7%, with the Tier-I CAR at 7.4%.
The bank plans to come out with a follow-on public offer (FPO) in
the domestic and international markets by June 2007 to raise
Rs20,000 crore. The bank's management has indicated that the pace
of growth in the economy and that of the bank is unprecedented and
the FPO tries to address the increased capital requirements of the
bank for the next three years.
-
The lower than
expected numbers coupled with the unexpected announcement of a
Rs20,000-crore FPO had significant impact on the stock price as
the same declined by 7% from its previous close of Rs934. At the
current market price of Rs866 , the stock is quoting at 19.5x its
FY2008E earnings and 2.8x FY2008E book value. We maintain our Buy
recommendation on the stock.
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation:
Buy
Price target: Rs558
Current market price: Rs370
Q1 results
marginally below expectations
Result
highlights
-
Ranbaxy
Laboratories (Ranbaxy) reported a 78.7% year-on-year (y-o-y)
growth in its earnings to Rs127.60 crore for the first quarter
ended March 2007. The same was marginally below our expectations
of Rs131.52 crore.
-
But the
revenues, which were up by 23% to Rs1,553.50 crore, were better
than our expectation of Rs1,437.16 crore. The revenue growth was
largely driven by the consolidation of Terapia which resulted in a
78% jump in the European business. The CIS countries showed a 61%
growth whereas the Asia Pacific and Middle Eastern markets
witnessed a 34% growth. The point worth noting is that the
domestic business reported a 26% growth which was way ahead of the
industry growth of about 9-10% during the quarter.
-
The OPM
witnessed a 150-basis-point expansion to 10.4% over the
corresponding previous quarter but was down by 60 basis points
sequentially. The pricing issues in the USA and EU continued to
hit the margin during the quarter. However, the company reported a
43.3% growth in the operating profit to Rs162.2 crore
-
During the
quarter, the depreciation cost was up by 30% and the tax incidence
increased to 21.6% from 15.8%. Thanks to a forex gain of Rs55
crore, the net profit grew by 78.7% to Rs127.60 crore in
Q1CY2007.
Indo Tech Transformers
Cluster: Ugly Duckling
Recommendation:
Buy
Price target: Rs375
Current market price: Rs325
Price target
revised to Rs375
Result
highlights
-
The Q4FY2007
results of Indo Tech Transformers Ltd (ITTL) are above our
expectations.
-
The company
has reported strong numbers for the fourth quarter. Revenues for
the quarter grew by 80% to Rs56.7 crore against our expectations
of Rs50 crore on the back of a 26% volume growth and better
realisation. The realisation was up an impressive 43% as the
realisation per mega voltage ampere (MVA) in Q4 was Rs7.68 lakh
against Rs5.38 lakh in Q4FY2006. The net profit grew by a whopping
170% to Rs10.3 crore against our expectations of Rs7.8
crore.
-
The operating
profit margin (OPM) for the quarter improved by 1,360 basis points
to 27.1% as against 13.5% in Q3FY2006, as a result of lower raw
material cost and other operational efficiencies. The raw material
cost as a percentage of sales declined to 63.3% as compared to
71.5% on a year-on-year (y-o-y) basis.
-
The interest
expense for the quarter stood at Rs0.32 crore, higher by 3.2% on a
y-o-y basis, and the depreciation cost for the quarter stood at
Rs1.16 crore, higher by 31.8% on a y-o-y basis.
-
The order
backlog at the end of this quarter stood at Rs148 crore.
-
For the full
year ended March 2007, the net sales grew by 68% to Rs155.6 crore
and the net profit grew by 117% to Rs25.4 crore.
Corporation Bank
Cluster: Apple Green
Recommendation:
Buy
Price target: Rs374
Current market price: Rs318
Q4FY2007
results—first-cut analysis
Result
highlights
-
Corporation
Bank's Q4FY2007 results are in line with our expectations; the
bank's profit after tax grew by 18.2% year on year (yoy) but
declined 19.1% quarter on quarter (qoq) to Rs118.5 crore compared
with our estimate of Rs116.1crore.
-
The net
interest income was up by 29.6% yoy and 20.9% qoq to Rs403 crore.
The FY2007 net interest margin stood at 3.24% compared with 3.15%
in M9FY2007 which implies that the bank witnessed a margin
expansion during Q4FY2007. However, excluding the one-time
interest on the cash reserve ratio balances, the margin appears to
have remained stable.
-
The
non-interest income increased by 21.7% yoy and 1.6% qoq to Rs161.9
crore. The other income excluding treasury was up 23.8% yoy and
25.4% qoq.
-
With the net
income up 27.2% yoy and the operating expenses up only 11.3% yoy,
the operating profit was up by 40.2% yoy to Rs343.2
crore.
-
The total
business of the bank increased by 27.2% to Rs72,306 crore while
the deposits increased by 28.8% to Rs42,357 crore and the advances
increased by 25% to Rs29,950 crore. Retail advances were up 17.9%
yoy.
-
The asset
quality of the bank continues to be healthy with stable gross
non-performing assets (NPA) at Rs624 crore and net NPA in
percentage terms at 0.47%. The capital adequacy remains at a
comfortable 12.7%.
-
At the current
market price of Rs318, the stock is quoting at 7.2x its FY2008E
earnings and 1.1x FY2008E book value. We maintain our Buy
recommendation on the stock with a price target of
Rs374.
Bank of Baroda
Cluster: Apple Green
Recommendation:
Buy
Price target: Rs310
Current market price: Rs236
Q4FY2007
results—first-cut analysis
Result
highlights
-
Bank of
Baroda's Q4FY2007 results are marginally below expectations; the
profit after tax grew by 17.6% year on year (yoy) but declined
25.4% quarter on quarter (qoq) to Rs245.7crore compared with our
estimate of Rs256.7crore.
-
The net
interest income was up by 27.5% yoy and 15% qoq to Rs1,104 crore
and was better than our estimate of Rs1,002 crore. For FY2007 the
reported net interest margin (NIM) stood at 3.23% compared with
3.21% for the nine months ended December 2006. This implies that
the bank witnessed a marginal expansion in its NIM during
Q4FY2007. However excluding the one-time interest on the cash
reserve ratio balances, the margin appears to decline by four
basis points to 3.19% in FY2007 which reflects that the NIM has
remained under pressure.
-
The
non-interest income declined by 35.4% yoy and 28% qoq to Rs240.3
crore mainly due to a lower treasury income, core fee income grew
by 36.4% yoy and 13.9% qoq.
-
The operating
profit was up 2.5% yoy but down by 10.7% qoq. However the core
operating profit (operating profit excluding treasury) grew by
11.8% yoy and 12.1% qoq.
-
The total
business of the bank increased by 35.8% to Rs20,8537 crore. While
the deposits increased by 33% to Rs12,4916 crore the advances
increased by 40% to Rs83,621 crore of which retail credit was up
46.4%. The bank's overseas operation saw a phenomenal 72%
year-on-year jump in the business.
-
The asset
quality of the bank continues to be healthy with the gross
non-performing asset (NPA) at Rs2,092 crore, reporting a
sequential decline of Rs300 crore, and the net NPA in percentage
terms standing at 0.6%, down sequentially from 0.67%. The capital
adequacy ratio remains at a comfortable 11.8% with Tier-I capital
at 8.74%.
-
At the current
market price of Rs236, the stock is quoting at 6.6x its FY2008E
earnings and 0.9x FY2008E book value. We maintain our Buy
recommendation on the stock with a price target of
Rs310. | |
