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Summary
of Contents
STOCK
UPDATE
Ranbaxy
Laboratories
Cluster: Apple
Green
Recommendation: Buy
Price target: Rs558
Current
market price: Rs392
Ranbaxy's US offices face surprise
On
February 14, 2007, US federal office of criminal investigation,
USFDA conducted a surprise search of Ranbaxy Laboratories' US
corporate offices and a manufacturing facility in New Jersey. The
manufacturing facility belongs to Ohm Laboratories (a 100%
subsidiary of the pharma major). Paper and electronic documents were
seized in the raids.
Andhra
Bank
Cluster:
Cannonball
Recommendation: Buy
Price target: Rs109
Current
market price: Rs81
Operating performance shows
improvement
Result highlights
-
For Q3FY2007 Andhra Bank (ANDB) reported a 5.8%
year-on-year (y-o-y) growth in its net profit to Rs136.3 crore.
The same is in line with our profit after tax (PAT) expectations
of Rs138.5 crore.
-
During the quarter the bank's net interest
income (NII) grew by 22.8% year on year (yoy) and by 9.9% quarter
on quarter (qoq) to Rs363.5 crore. ANDB has been one of the few
banks which have shown an improvement in their net interest margin
(NIM) yoy and maintained the NIM stable on a sequential basis.
-
The non-interest income of the bank increased
by 11.8% yoy to Rs132.9 crore despite a 21.6% y-o-y decline in the
treasury income. The non-interest income excluding the treasury
income was up 18.7% yoy and 5.1% qoq.
-
The operating profit was up 28.5% yoy and 16.9%
qoq while the core-operating profit (excluding the treasury
income) increased by 33.8% yoy and 19% qoq.
-
Provisions and contingencies showed a
significant jump to Rs64.5 crore mainly on account of higher
investment depreciation and provisions related to non-performing
assets (NPAs).
-
The net NPAs increased from 0.1% to 0.44% on a
sequential basis while the gross NPAs declined by four basis
points to 1.72% qoq. However, in absolute terms, both the net NPAs
and the gross NPAs showed an increase. Despite the rise in the
NPAs the asset quality of the bank continues to be one of the best
in the industry.
-
The bank has reported numbers in line with our
expectations and also improved on its operating performance. The
capital adequacy levels are comfortable at 12.8% with the Tier-I
capital at 11.4%. Also, despite some increase during the quarter
the asset quality of the bank continues to be among the best in
the industry.
-
At the current market price of Rs81, the stock
is quoting at 6.1x its FY2008E earnings per share (EPS), 3.7x
pre-provision profits (PPP) and 1.1x book value (BV). The bank is
available at attractive valuations, given its low price to book
multiple with an average return on equity (RoE) of 18.5% compared
with its peers. We maintain our Buy call on the stock with a price
target of
Rs109. |
