Summary
of Contents
STOCK UPDATE
UTI Bank Cluster: Emerging
Star Recommendation: Buy Price target: Rs490 Current
market price: Rs410
Price target
revised to Rs490
Result
highlight
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UTI Bank's
Q2FY2007 net profit at Rs142.0 crore was in line with our
expectations.
-
The net
interest income (NII) grew by 43% year on year (yoy) backed by a
strong growth in the advances.
-
Remarkably UTI
Bank's net interest margins (NIMs) expanded by 12 basis points yoy
and by 24 basis points quarter on quarter (qoq) as the yield on
the assets expanded and there was a growth in the demand deposits
at almost one and half times the growth in the overall
deposits.
-
The fee income
too grew by a strong 66% yoy backed by a strong growth in the fee
income from the cash management and retail businesses.
-
The operating
profit for the quarter grew by a slower 16% yoy to Rs274.5 crore.
The slower growth was attributable to a steep rise in the employee
and other cost. However, we believe that the rise in the cost is
justifiable looking at the rapid growth expected in the bank's
branch network.
-
The net profit
grew by a faster 30.2% due to a lower provisioning for investment
depreciation and a higher loan provisioning.
-
The net
non-performing assets (NPAs) as a percentage of the bank's
customer assets were flat at 0.74% compared with 0.73% in
Q1FY2007. However, the same have come down substantially over
Q2FY2006.
-
UTI Bank's
Tier-I capital adequacy ratio (CAR) stood at 6.71% at the end of
Q2FY2007 whereas its overall CAR stood at 11.5%. The bank will
have to go in for further Tier-I capital raising to sustain the
growth.
-
We expect UTI
Bank to go in for plain equity issuance of $250 million by the end
of FY2007 or early FY2008 which will raise its book value to Rs167
by the end of FY2008, up by 16% from our current estimates.
-
At the current
market price of Rs410, the stock is quoting at 14.1x its FY2008E
EPS and 2.7x its FY2008E book value (BV). We reiterate our Buy
recommendation on the bank with a revised price target of Rs490
based on our revised earnings as well as estimated increase in its
book value.
Indian Hotels Company Cluster: Apple
Green Recommendation: Buy Price target:
Rs1,474 Current market price: Rs1,388
Merger to be
earnings accretive The board of directors of Indian Hotels Company Ltd (IHCL)
has approved the proposal for amalgamation of 4 of its
subsidiary/associate companies with itself. Specifically, the
proposal seeks to amalgamate Indian Resort Hotels Ltd, Gateway
Hotels and Gateway Resorts Ltd, Asia Pacific Hotels Ltd and Taj
Lands End Ltd into the company in terms of a scheme of amalgamation
under section 391-394 of the Companies Act
1956. |