Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ACTION
Removed from Asia Pacific Sell List
Infrastructure Development Finance Co.
Equity Research
Negatives in the price; upgrade to Neutral on valuation
What happened
We upgrade IDFC to Neutral from Sell following the recent sharp correction in
its stock price. Post correction, the stock now trades at 12.6X FY12E P/E and
1.84X P/B vs ROE of 15%. We believe the current price reflects most of the
negatives such as potential margin compression in 2HFY11 and relatively
slower loan growth vs 1H. We, however, rate IDFC as Neutral as we see more
value in other banks under our coverage that generate significantly higher RoE
(+20% for PNB (PNBK.BO; Buy; Rs1,080)/BOB (BOB.BO; Buy; Rs860)). Since we
downgraded IDFC to Sell on Aug 31, 2010, the stock declined 20% vs. +0.3%
for BSE Sensex (past 12m -6% vs Sensex +10%).
Current view
IDFC reported net profit growth of 18% yoy to Rs3.21 bn in 3QFY11. This
was 18% below our estimate as IDFC booked lower capital gains. We lower
our FY11E-FY13E EPS by 3%-7% to reflect lower loan growth, margin
pressure, lower capital gains and fees, and consequently our 12-m SOTPbased TP to Rs175 (from Rs195 earlier). Given the competitive
environment and 3Q order book declines in the Indian capital goods and
infrastructure sector, we do not expect the loan disbursement trajectory to
continue the strong trend into FY12E—we lower our disbursement growth
forecast to 16.4% from 40% earlier. Consequently, we adjust our
outstanding loan growth to 32.7% for FY12E (vs 48.9% earlier). We also
believe that spreads on infrastructure lending have peaked and will likely
come off by 16 bp yoy during FY12E (with higher dispersion between
quarters; 2.76% in 4QFY12E from peak levels of 3.6% in 4QFY10). The
reduction in the fee income implies lower funds under management as
some of its funds are in the exit mode. Given volatile market conditions,
we do not see any fund launches in FY12 for IDFC, but assume an increase
of about 30% in FY13E.
Upside risks: Stronger business volumes, recovering liquidity buoying
NIMs; Downside risks: Higher borrowing cost on tight liquidity.
INVESTMENT LIST MEMBERSHIP
Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ACTION
Removed from Asia Pacific Sell List
Infrastructure Development Finance Co.
Equity Research
Negatives in the price; upgrade to Neutral on valuation
What happened
We upgrade IDFC to Neutral from Sell following the recent sharp correction in
its stock price. Post correction, the stock now trades at 12.6X FY12E P/E and
1.84X P/B vs ROE of 15%. We believe the current price reflects most of the
negatives such as potential margin compression in 2HFY11 and relatively
slower loan growth vs 1H. We, however, rate IDFC as Neutral as we see more
value in other banks under our coverage that generate significantly higher RoE
(+20% for PNB (PNBK.BO; Buy; Rs1,080)/BOB (BOB.BO; Buy; Rs860)). Since we
downgraded IDFC to Sell on Aug 31, 2010, the stock declined 20% vs. +0.3%
for BSE Sensex (past 12m -6% vs Sensex +10%).
Current view
IDFC reported net profit growth of 18% yoy to Rs3.21 bn in 3QFY11. This
was 18% below our estimate as IDFC booked lower capital gains. We lower
our FY11E-FY13E EPS by 3%-7% to reflect lower loan growth, margin
pressure, lower capital gains and fees, and consequently our 12-m SOTPbased TP to Rs175 (from Rs195 earlier). Given the competitive
environment and 3Q order book declines in the Indian capital goods and
infrastructure sector, we do not expect the loan disbursement trajectory to
continue the strong trend into FY12E—we lower our disbursement growth
forecast to 16.4% from 40% earlier. Consequently, we adjust our
outstanding loan growth to 32.7% for FY12E (vs 48.9% earlier). We also
believe that spreads on infrastructure lending have peaked and will likely
come off by 16 bp yoy during FY12E (with higher dispersion between
quarters; 2.76% in 4QFY12E from peak levels of 3.6% in 4QFY10). The
reduction in the fee income implies lower funds under management as
some of its funds are in the exit mode. Given volatile market conditions,
we do not see any fund launches in FY12 for IDFC, but assume an increase
of about 30% in FY13E.
Upside risks: Stronger business volumes, recovering liquidity buoying
NIMs; Downside risks: Higher borrowing cost on tight liquidity.
INVESTMENT LIST MEMBERSHIP
Neutral
No comments:
Post a Comment