Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Thesis
• Given recent correction – valuations
are attractive at 0.8x F2012e BV, 6.8x
PE F2012e.
• 150 bps expansion in margins over
the past year aided by low short rate
environment – expect it to unwind
partially (60 bps including
compression in F3Q11 till F4Q12e) as
short rates rise.
• CASA/funding is weak at ~23-24%.
• Tier I ratio has improved to 12.4%
following recent capital infusion by the
government.
• Even after factoring in the margin
compression in F2012 earnings –
valuations look very attractive.
Key Value Drivers
• Margin progression.
• Trend in loan growth.
• Fee income growth.
• Credit Costs.
• Operating Costs.
Potential Catalysts
• Margin progression in F2012.
• Slippages trend in coming quarters.
• Trend in system-wide loan / deposit
growth (released on a fortnightly
basis).
• Market ascribing value to the 23%
stake in life insurance venture with
HSBC and OBC.
Key Risks
• Downside: slower-than-expected loan
growth, sharp compression in NIMs
and significant deterioration in asset
quality (restructured loans slippages)
• Upside: Stronger than expected loan
growth. Credit costs below
expectations
Price Target Rs450 Derived from our probability weighted residual income model.
Bull
Case
Rs545
1.3x
F2013e
BVPS
Margins sustain at current levels in F2011 and F2012; credit costs
are more benign. Margins sustain around current reported levels of
3.1% in F2011 and F2012. NPL formation slows faster than expectations
and credit costs drop to 40-50 bps in F2012-13.
Base
Case
Rs485
1.2x
F2013e
BVPS
Margins compress driven by rising deposit costs. We expect
margins to compress from reported levels of 3.1% in F3Q11 to 2.5% by
F4Q12e. Loan book grows at 18% in F2012-13. Credit costs remain
elevated in F2011 (84 bps) owing to slippages from restructured loans
(20%) but normalize to 69 bps in F2012.
Bear
Case
Rs250
0.6x
F2013e
BVPS
Disruptive rise in rates – margins compress sharply; higher than
expected credit costs: Flow of impaired loan formation resumes and
credit costs are higher than base case. Margins compress to 2.0%-2.25%
owing to a sharp rise in short rates (owing to capital outflows).
Source: FactSet, Morgan Stanley Research estimates
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Investment Thesis
• Given recent correction – valuations
are attractive at 0.8x F2012e BV, 6.8x
PE F2012e.
• 150 bps expansion in margins over
the past year aided by low short rate
environment – expect it to unwind
partially (60 bps including
compression in F3Q11 till F4Q12e) as
short rates rise.
• CASA/funding is weak at ~23-24%.
• Tier I ratio has improved to 12.4%
following recent capital infusion by the
government.
• Even after factoring in the margin
compression in F2012 earnings –
valuations look very attractive.
Key Value Drivers
• Margin progression.
• Trend in loan growth.
• Fee income growth.
• Credit Costs.
• Operating Costs.
Potential Catalysts
• Margin progression in F2012.
• Slippages trend in coming quarters.
• Trend in system-wide loan / deposit
growth (released on a fortnightly
basis).
• Market ascribing value to the 23%
stake in life insurance venture with
HSBC and OBC.
Key Risks
• Downside: slower-than-expected loan
growth, sharp compression in NIMs
and significant deterioration in asset
quality (restructured loans slippages)
• Upside: Stronger than expected loan
growth. Credit costs below
expectations
Price Target Rs450 Derived from our probability weighted residual income model.
Bull
Case
Rs545
1.3x
F2013e
BVPS
Margins sustain at current levels in F2011 and F2012; credit costs
are more benign. Margins sustain around current reported levels of
3.1% in F2011 and F2012. NPL formation slows faster than expectations
and credit costs drop to 40-50 bps in F2012-13.
Base
Case
Rs485
1.2x
F2013e
BVPS
Margins compress driven by rising deposit costs. We expect
margins to compress from reported levels of 3.1% in F3Q11 to 2.5% by
F4Q12e. Loan book grows at 18% in F2012-13. Credit costs remain
elevated in F2011 (84 bps) owing to slippages from restructured loans
(20%) but normalize to 69 bps in F2012.
Bear
Case
Rs250
0.6x
F2013e
BVPS
Disruptive rise in rates – margins compress sharply; higher than
expected credit costs: Flow of impaired loan formation resumes and
credit costs are higher than base case. Margins compress to 2.0%-2.25%
owing to a sharp rise in short rates (owing to capital outflows).
Source: FactSet, Morgan Stanley Research estimates
No comments:
Post a Comment