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India Equity Research Reports, IPO and Stock News
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Key Takeaways
Outlook on macro economic environment
The current macro environment remains challenging, with concerns over project
execution and procedural delays on account of uncertainty over regulatory clearances.
Concerns over fuel supply and procedural delays need timely policy action.
Despite the situation worsening, no further action on the government's part could
create significant pressure, derail the growth cycle, and worsen asset quality.
Medium-term growth outlook maintained
Sanctions and disbursals declined by over 50% YoY during 1QFY12, partly due to
slowdown in overall activity and partly due to the high base of the previous year.
For FY12, the management has guided 15% growth. It maintains its medium-term
target of achieving a balance sheet size of INR1t by 2014 (CAGR of ~28%).
In the roads sector, some traction is being seen due to new projects awarded.
However, it could translate into funding opportunity after a lag of 2-3 quarters.
Spreads likely to be maintained
In 1QFY12, IDFC maintained its spread at 2.2%. Going forward, the management
does not expect significant pressure on spreads, as (1) IDFC refrains from growing
aggressively, and (2) banks are raising their lending rates, reducing the overall
competitive pressure.
Asset quality will remain a monitorable
IDFC's exposure to state utilities remains negligible, and while its exposure to the
power sector is ~43% of its total exposure, there are no major signs of stress, yet.
The management is cognizant of the current uncertainties in the sector and remains
cautious, as macro risks persist.
Other highlights
Outlook on capital market related businesses continues to be weak and increased
competitive intensity is impacting profitability.
On the principal investments front, IDFC has investments of INR10b-12b in unlisted
companies.
Valuation and view
Moderation in asset growth and lower income from the capital market related businesses
is likely to impact return ratios in the near term. We expect IDFC to report an EPS of
INR9.7 in FY12 and INR11.7 in FY13, translating into an EPS CAGR of 15.5% over FY11-
13. The stock trades at 1.3x FY12E and 1.1x FY13E ABV. Neutral.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Outlook on macro economic environment
The current macro environment remains challenging, with concerns over project
execution and procedural delays on account of uncertainty over regulatory clearances.
Concerns over fuel supply and procedural delays need timely policy action.
Despite the situation worsening, no further action on the government's part could
create significant pressure, derail the growth cycle, and worsen asset quality.
Medium-term growth outlook maintained
Sanctions and disbursals declined by over 50% YoY during 1QFY12, partly due to
slowdown in overall activity and partly due to the high base of the previous year.
For FY12, the management has guided 15% growth. It maintains its medium-term
target of achieving a balance sheet size of INR1t by 2014 (CAGR of ~28%).
In the roads sector, some traction is being seen due to new projects awarded.
However, it could translate into funding opportunity after a lag of 2-3 quarters.
Spreads likely to be maintained
In 1QFY12, IDFC maintained its spread at 2.2%. Going forward, the management
does not expect significant pressure on spreads, as (1) IDFC refrains from growing
aggressively, and (2) banks are raising their lending rates, reducing the overall
competitive pressure.
Asset quality will remain a monitorable
IDFC's exposure to state utilities remains negligible, and while its exposure to the
power sector is ~43% of its total exposure, there are no major signs of stress, yet.
The management is cognizant of the current uncertainties in the sector and remains
cautious, as macro risks persist.
Other highlights
Outlook on capital market related businesses continues to be weak and increased
competitive intensity is impacting profitability.
On the principal investments front, IDFC has investments of INR10b-12b in unlisted
companies.
Valuation and view
Moderation in asset growth and lower income from the capital market related businesses
is likely to impact return ratios in the near term. We expect IDFC to report an EPS of
INR9.7 in FY12 and INR11.7 in FY13, translating into an EPS CAGR of 15.5% over FY11-
13. The stock trades at 1.3x FY12E and 1.1x FY13E ABV. Neutral.
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