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I n v e s t m e n t i n n e w b u s i n e s s b o g s d o w n P A T
Edelweiss Capital reported 39% YoY (2% QoQ) jump in total revenues to
|396 crore which was ahead of our expectation of | 361 crore buoyed by
higher interest income at | 234.8 crore (up 87% YoY). Fee and
commission declined from |128 crore in Q4FY11 to |97 crore in Q1FY12.
However, higher interest expenses led to inline profits at |33 crore.
Agency business which had a share of 33% in total revenues in FY11 has
declined to 25%, while interest income now contributes 59% as against
51% in FY11. Moreover, investments in Life Insurance and retail
businesses (currently non-yielding) are weighing down on profits. We
expect these investments to linger on PAT for few more quarters. We
expect | 191 crore of PAT in FY13E against | 233 crore in FY11.
ƒ Financing income- the growth engine
Edelweiss reported a marginal |40 crore QoQ dip in loan book to |
2600 crore. The company started housing finance in H2FY11
(portfolio now stands at | 185 crore). It plans to grow in this
segment by | 100 crore (monthly run rate) and reach size of | 5000
crore by FY14. We therefore see a good traction in this segment
supporting top-line growth, even at 50% achievement rate which we
have modelled in. In this backdrop we expect 31% CAGR in
financing income over FY11-13E to | 1294 crore and expect 69%
contribution to total income in FY13E.
ƒ Fee based income growth looks flat
Edelweiss reported 24%QoQ decline in fee income in Q1FY12 to |
97 crore (subdued performance from broking and investment
banking). Daily average turnover declined 11.3% QoQ to | 5190
crore with yields declining from 4.2% to 4%. We expect Edelweiss
to maintain its market share of 3.8-4% and yield of 4-4.2bps and
estimate fee based income to contribute 20% to total income in
FY13E at |375crore.
V a l u a t i o n
On SOTP basis, we have valued the agency business (brokerage and
investment banking) at 10x FY13E EPS and capital business (net worth
based-generating treasury and financing income) at 0.7x FY13E BV. We
revise our TP to | 32 and recommend to Hold the stock. In near term
bleak capital market outlook is likely to weigh on stock performance
despite compelling valuations
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
I n v e s t m e n t i n n e w b u s i n e s s b o g s d o w n P A T
Edelweiss Capital reported 39% YoY (2% QoQ) jump in total revenues to
|396 crore which was ahead of our expectation of | 361 crore buoyed by
higher interest income at | 234.8 crore (up 87% YoY). Fee and
commission declined from |128 crore in Q4FY11 to |97 crore in Q1FY12.
However, higher interest expenses led to inline profits at |33 crore.
Agency business which had a share of 33% in total revenues in FY11 has
declined to 25%, while interest income now contributes 59% as against
51% in FY11. Moreover, investments in Life Insurance and retail
businesses (currently non-yielding) are weighing down on profits. We
expect these investments to linger on PAT for few more quarters. We
expect | 191 crore of PAT in FY13E against | 233 crore in FY11.
ƒ Financing income- the growth engine
Edelweiss reported a marginal |40 crore QoQ dip in loan book to |
2600 crore. The company started housing finance in H2FY11
(portfolio now stands at | 185 crore). It plans to grow in this
segment by | 100 crore (monthly run rate) and reach size of | 5000
crore by FY14. We therefore see a good traction in this segment
supporting top-line growth, even at 50% achievement rate which we
have modelled in. In this backdrop we expect 31% CAGR in
financing income over FY11-13E to | 1294 crore and expect 69%
contribution to total income in FY13E.
ƒ Fee based income growth looks flat
Edelweiss reported 24%QoQ decline in fee income in Q1FY12 to |
97 crore (subdued performance from broking and investment
banking). Daily average turnover declined 11.3% QoQ to | 5190
crore with yields declining from 4.2% to 4%. We expect Edelweiss
to maintain its market share of 3.8-4% and yield of 4-4.2bps and
estimate fee based income to contribute 20% to total income in
FY13E at |375crore.
V a l u a t i o n
On SOTP basis, we have valued the agency business (brokerage and
investment banking) at 10x FY13E EPS and capital business (net worth
based-generating treasury and financing income) at 0.7x FY13E BV. We
revise our TP to | 32 and recommend to Hold the stock. In near term
bleak capital market outlook is likely to weigh on stock performance
despite compelling valuations
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