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Contents
Punjab National Bank – Management Meet Update
Margins outlook stable qoq
PNB has raised its deposit rates by 75-150bps YTD and its BPLR and base rate by 50bps and 150bps each. With strong domestic CASA of 41% and almost all loans linked to base rate/BPLR, domestic NIMs are likely remain stable over H2FY11. The management has guided that that wouldn’t be unduly worried until the margin hit 3.5%.
Growth numbers maintained as of now
PNB has maintained its growth target for the year in tact as of now. The advances growth is likely to be at 23% to Rs2.3tn and deposit growth at 20% to Rs3.0tn
Rising G-Sec yields do not pose huge risks
PNB’s AFS portfolio stood at Rs180bn with an M-duration of 2.2years implying a 0.5% change in the yields would have impact of ~Rs2.0bn on profits or 4.5% of FY11 net profit.
Pension liabilities not yet ascertained
Although pension liabilities remain unascertained as of now, PNB already provides Rs1.25bn/quarter for the same which can easily be increased to Rs2.5bn/quarter.
NPAs to remain under control
PNB has kept its target of ~2.0% gross NPAs for FY11E.
Valuations and view
The stock is currently quoting at 2.1x FY11E ABV and 1.6x FY12E ABV with attractive average RoEs of 23.5%. We believe that the valuations are not unreasonable looking at strong returns profile. We maintain our BUY rating on the stock with price target of Rs1500.
Blue Star Management Meet Update; Passing blues; Accumulate; Target: Rs513
n Management upbeat on - execution in EMP&PAC, demand in Cooling Products. But, concerned over operating margins
n Higher working capital and debt resulted in 82% jump in capital employed – to adversely impact return ratios, going forward
n Lower earnings for FY11E (-11% to Rs22.1) and FY12E (-4% to Rs28.5) to factor (1) DS Gupta Constructions acquisition (2) pressure on EBITDA margins (3) deteriorating working capital
n Reiterate positive bias on BLSR. Retain Accumulate rating with revised target price of Rs513 (18X FY12E earnings)
Cipla Company Update; Is Cipla up for sale?... If YES, at what price?; Accumulate; Target: Rs350
n Several times in the past, rumors that Cipla might be sold out to MNCs have been making market rounds on & off. Reasons being a) Promoters getting aged, b) Successor issue, & c) Mr. Amar Lulla moved out
n If such an event triggers, the market would be excited to know at what price? Our calculations suggests the probable price at which the deal could materialize
n Considering the valuations at which Piramal and Ranbaxy promoters sold their stake to MNC’s, we have arrived at per share value for Cipla (refer Table 1)
n Our fair value for Cipla is Rs350 per share. We are of the view that Cipla will continue to trade at a premium till the stake sale buzz remains active in the market. We continue to remain positive on the company
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