Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDFC's 3QFY11 PAT grew 19% YoY, led by strong NII growth of 67% YoY.
Key highlights
Business momentum slowed down, with sanctions declining 44% YoY to Rs37.4b for 3QFY11. While disbursements
were up 68% YoY to Rs51.3b, the pace of growth was slow (disbursements in 2QFY11 were up 3.3x). Loans towards
infrastructure grew 51% YoY and 1.8% QoQ. Uncertain economic scenario and sell-down of loans impacted the
growth rate. However, management remains confident of increasing balance sheet size to Rs1,000b by FY13.
Spreads (12-months rolling) remained stable on a QoQ basis at 2.4%, NII as a percentage of average assets improved
20bp QoQ to 3.8%. NII from infrastructure activity was up 59% YoY (15% QoQ) and NII from treasury activity was
Rs470m v/s Rs190m in 3QFY10 (Rs150m in 2QFY11). Large part of the disbursements in 2QFY11 was done at the
end of the quarter. Full impact of these loans on income resulted in strong NII growth in 3QFY11.
Fee income (non-interest income ex trading profits) improved 26% YoY, led by improvement in loan-related and other
fee income. Principal gains were lower at Rs300m v/s Rs1.05b a year ago and Rs120m in 2QFY11. Fee income
declined 35% QoQ, as disbursements slowed down, impacting loan-related fees and investment banking fees has
also declined (Rs370m v/s Rs590m a quarter ago).
Asset quality remains impeccable, with NNPA ratio at 11bp as at 2QFY11. The company made 65bp of standard
provisions for incremental disbursements. Cumulative standard asset provision stands at Rs6.3b (1.8% of standard
loans).
While the stock has corrected 30%+ from its recent peak, slowdown in loan growth and stressed liquidity conditions
is likely to be a key headwind in the near term. The stock trades at 1.5x FY12E ABV and 13.8x EPS. Neutral
Business momentum moderates QoQ; asset pipeline remains healthy
In 3QFY11, sanctions were down 44% YoY to Rs37.4b; disbursements were up 68% YoY
to Rs51.3b. The pace of growth has been slow (in 2QFY11, sanctions were up 3.6x YoY
and disbursements up 3.3x). Management cited that the uncertainty in economic conditions
and certain cancellations of sanctioned loans impacted the growth rate. Asset pipeline has
declined to Rs180b from Rs236b in 2QFY11 and Rs188b in 1QFY11.
During the quarter, the share of sanctions for the Telecom segment dropped from 10% in
2QFY11 to 1% in 3QFY11. Telecom-related sanctions were cancelled during the quarter.
Energy and Telecom contribute ~57% and ~37%, respectively of the overall asset pipeline.
Share of Telecom in overall disbursements declined 400bp QoQ to 21%, while share of
Energy and Transportation increased 200bp each to 42% and 24%. Loans grew 51% YoY
and 1.8% QoQ to Rs350b. There were some sell-downs in the Transportation segment
(quantum not disclosed), which impacted sequential growth. Borrowings increased 54%
YoY and 3.7% QoQ to Rs374.7b. During the quarter, incremental loans were at Rs6.2b v/
s incremental borrowings at Rs13.3b.
Spreads remained stable QoQ
Overall NII grew 67% YoY to Rs4.6b, led by 59% YoY growth in infrastructure NII.
Strong loan growth (51% YoY) helped report strong NII growth. Treasury NII was up at
Rs470m v/s Rs190m in 3QFY10 (Rs150m in 2QFY11). Large part of disbursements in
2QFY11 was done at the end of the quarter. Full impact on income from these loans
resulted in strong NII growth. Overall spread remained stable on a QoQ basis at 2.4% in
December 2010 (12m trailing).
Non-interest income (ex principal gains) grew 26% YoY, down 35% QoQ
Overall non-interest income declined 17% YoY; ex-principal gains growth was healthy at
26% YoY. Loan-related fees as a % of disbursements remained stable at ~1%. In absolute
terms, loan-related fees increased 73% YoY to Rs520m (down from Rs1.1b in 2QFY11,
as disbursements declined sharply on a QoQ basis). IB fees grew 3.4x YoY (down 37%
QoQ) and broking fees declined 39% YoY (stable QoQ).
Aggregate assets under management (AUM) were down 8% QoQ, led by 10% QoQ
drop in IDFC Mutual Fund's AUM. Asset management fees dropped 7% YoY and 16%
QoQ to Rs630m. For the quarter, there was nil carry income (v/s gains of Rs200m in
2QFY11). Income from domestic MF fees stood at Rs300m v/s Rs170m in 2QFY11
(Rs280m in 3QFY10).
Valuation and view: downgrading estimates by ~5%
We have downgraded our estimates by ~5% to factor in slowdown in loan growth and fee
income. In our view, while growth is likely to be very strong over the next few years,
excess capital will keep ROE under 15% in FY12 and ~16% in FY13. In the near term,
RoA is likely to decline from 3.4% in FY10 to 3.1% in FY12 and ~2.7% in FY12/13, as
growth picks up and spreads compress. However, higher contribution from fee-based
income will keep RoA healthy.
We have incorporated recently-issued compulsorily convertible preference shares as equity,
as they have to be converted by the end of FY12. We expect EPS of Rs8.5 in FY11,
Rs10.2 in FY12 and Rs12.4 in FY13. Consolidated BV would be Rs76 in FY11, Rs84 in
FY12 and Rs94 in FY13. BV adjusted for goodwill and investment in subsidiaries is expected
to be Rs68 in FY11, Rs77 in FY12 and Rs89 in FY13. While the stock has corrected
30%+ from its recent peak, slowdown in loan growth and stressed liquidity conditions is
likely to be a key headwind in the near term. The stock trades at 1.5x FY12E ABV and
13.8x EPS. We maintain Neutral.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDFC's 3QFY11 PAT grew 19% YoY, led by strong NII growth of 67% YoY.
Key highlights
Business momentum slowed down, with sanctions declining 44% YoY to Rs37.4b for 3QFY11. While disbursements
were up 68% YoY to Rs51.3b, the pace of growth was slow (disbursements in 2QFY11 were up 3.3x). Loans towards
infrastructure grew 51% YoY and 1.8% QoQ. Uncertain economic scenario and sell-down of loans impacted the
growth rate. However, management remains confident of increasing balance sheet size to Rs1,000b by FY13.
Spreads (12-months rolling) remained stable on a QoQ basis at 2.4%, NII as a percentage of average assets improved
20bp QoQ to 3.8%. NII from infrastructure activity was up 59% YoY (15% QoQ) and NII from treasury activity was
Rs470m v/s Rs190m in 3QFY10 (Rs150m in 2QFY11). Large part of the disbursements in 2QFY11 was done at the
end of the quarter. Full impact of these loans on income resulted in strong NII growth in 3QFY11.
Fee income (non-interest income ex trading profits) improved 26% YoY, led by improvement in loan-related and other
fee income. Principal gains were lower at Rs300m v/s Rs1.05b a year ago and Rs120m in 2QFY11. Fee income
declined 35% QoQ, as disbursements slowed down, impacting loan-related fees and investment banking fees has
also declined (Rs370m v/s Rs590m a quarter ago).
Asset quality remains impeccable, with NNPA ratio at 11bp as at 2QFY11. The company made 65bp of standard
provisions for incremental disbursements. Cumulative standard asset provision stands at Rs6.3b (1.8% of standard
loans).
While the stock has corrected 30%+ from its recent peak, slowdown in loan growth and stressed liquidity conditions
is likely to be a key headwind in the near term. The stock trades at 1.5x FY12E ABV and 13.8x EPS. Neutral
Business momentum moderates QoQ; asset pipeline remains healthy
In 3QFY11, sanctions were down 44% YoY to Rs37.4b; disbursements were up 68% YoY
to Rs51.3b. The pace of growth has been slow (in 2QFY11, sanctions were up 3.6x YoY
and disbursements up 3.3x). Management cited that the uncertainty in economic conditions
and certain cancellations of sanctioned loans impacted the growth rate. Asset pipeline has
declined to Rs180b from Rs236b in 2QFY11 and Rs188b in 1QFY11.
During the quarter, the share of sanctions for the Telecom segment dropped from 10% in
2QFY11 to 1% in 3QFY11. Telecom-related sanctions were cancelled during the quarter.
Energy and Telecom contribute ~57% and ~37%, respectively of the overall asset pipeline.
Share of Telecom in overall disbursements declined 400bp QoQ to 21%, while share of
Energy and Transportation increased 200bp each to 42% and 24%. Loans grew 51% YoY
and 1.8% QoQ to Rs350b. There were some sell-downs in the Transportation segment
(quantum not disclosed), which impacted sequential growth. Borrowings increased 54%
YoY and 3.7% QoQ to Rs374.7b. During the quarter, incremental loans were at Rs6.2b v/
s incremental borrowings at Rs13.3b.
Spreads remained stable QoQ
Overall NII grew 67% YoY to Rs4.6b, led by 59% YoY growth in infrastructure NII.
Strong loan growth (51% YoY) helped report strong NII growth. Treasury NII was up at
Rs470m v/s Rs190m in 3QFY10 (Rs150m in 2QFY11). Large part of disbursements in
2QFY11 was done at the end of the quarter. Full impact on income from these loans
resulted in strong NII growth. Overall spread remained stable on a QoQ basis at 2.4% in
December 2010 (12m trailing).
Non-interest income (ex principal gains) grew 26% YoY, down 35% QoQ
Overall non-interest income declined 17% YoY; ex-principal gains growth was healthy at
26% YoY. Loan-related fees as a % of disbursements remained stable at ~1%. In absolute
terms, loan-related fees increased 73% YoY to Rs520m (down from Rs1.1b in 2QFY11,
as disbursements declined sharply on a QoQ basis). IB fees grew 3.4x YoY (down 37%
QoQ) and broking fees declined 39% YoY (stable QoQ).
Aggregate assets under management (AUM) were down 8% QoQ, led by 10% QoQ
drop in IDFC Mutual Fund's AUM. Asset management fees dropped 7% YoY and 16%
QoQ to Rs630m. For the quarter, there was nil carry income (v/s gains of Rs200m in
2QFY11). Income from domestic MF fees stood at Rs300m v/s Rs170m in 2QFY11
(Rs280m in 3QFY10).
Valuation and view: downgrading estimates by ~5%
We have downgraded our estimates by ~5% to factor in slowdown in loan growth and fee
income. In our view, while growth is likely to be very strong over the next few years,
excess capital will keep ROE under 15% in FY12 and ~16% in FY13. In the near term,
RoA is likely to decline from 3.4% in FY10 to 3.1% in FY12 and ~2.7% in FY12/13, as
growth picks up and spreads compress. However, higher contribution from fee-based
income will keep RoA healthy.
We have incorporated recently-issued compulsorily convertible preference shares as equity,
as they have to be converted by the end of FY12. We expect EPS of Rs8.5 in FY11,
Rs10.2 in FY12 and Rs12.4 in FY13. Consolidated BV would be Rs76 in FY11, Rs84 in
FY12 and Rs94 in FY13. BV adjusted for goodwill and investment in subsidiaries is expected
to be Rs68 in FY11, Rs77 in FY12 and Rs89 in FY13. While the stock has corrected
30%+ from its recent peak, slowdown in loan growth and stressed liquidity conditions is
likely to be a key headwind in the near term. The stock trades at 1.5x FY12E ABV and
13.8x EPS. We maintain Neutral.
No comments:
Post a Comment