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R i s i n g c o s t s s t a y , p r o f i t s c o n t i n u e t o d e c l i n e …
Edelweiss Capital maintained revenues at | 385 crore, declining 3% QoQ
and rising 2% YoY in line with our expectation of | 375 crore. Treasury
and interest income at | 276 crore remain major contributors (72%) to
topline though it declined QoQ in absolute terms. Investments in life
insurance and higher costs from the same are expected to keep net
profits lower for the foreseeable future. We expect PAT to grow to | 182
crore in FY13E.
Currently, brokerages are unable to maintain yields due to increased F&O
volumes. IB and AUM based services are expected to remain subdued as
the market environment is unfavourable. Hence, we believe the
underperformance of the sector will continue. We are, therefore,
dropping coverage on the stock and the sector.
ƒ Financing income- the growth engine
The loan book grew marginally to | 2640 crore from | 2599 crore.
The housing finance portfolio has increased to | 350 crore from |
185 crore in Q1FY12, which is quite sharp. Financing and treasury
income declined to | 276 crore from | 295 crore. We believe this
may be due to lower treasury performance. We believe until
insurance starts contributing and market conditions revive, financing
income is expected to contribute to overall topline.
ƒ Market share stable, client volume increases…
Edelweiss reported an average daily turnover of | 5300 crore, a
sequential rise of | 110 crore. The market share has declined to
~3.6% from 3.8% in Q1FY12. However, client volumes have
increased from | 2350 crore to | 2650 crore leading to 8% QoQ rise
in fee income to | 104 crore from | 97 crore. The agency business,
which had a share of 33% in total revenues in FY11, has declined to
27%. This should decline further due to increasing interest income
and future insurance business contribution.
V a l u a t i o n
We believe Edelweiss will report a profit of | 30-40 crore for the next few
quarters. Also, with weak market sentiments, investment banking and
turnover will dip, hampering agency based fee income. Return ratios are
expected to be subdued at 7-8% RoE for the next couple of years leaving
lesser scope for the stock and sector to emerge out of underperformance
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
R i s i n g c o s t s s t a y , p r o f i t s c o n t i n u e t o d e c l i n e …
Edelweiss Capital maintained revenues at | 385 crore, declining 3% QoQ
and rising 2% YoY in line with our expectation of | 375 crore. Treasury
and interest income at | 276 crore remain major contributors (72%) to
topline though it declined QoQ in absolute terms. Investments in life
insurance and higher costs from the same are expected to keep net
profits lower for the foreseeable future. We expect PAT to grow to | 182
crore in FY13E.
Currently, brokerages are unable to maintain yields due to increased F&O
volumes. IB and AUM based services are expected to remain subdued as
the market environment is unfavourable. Hence, we believe the
underperformance of the sector will continue. We are, therefore,
dropping coverage on the stock and the sector.
ƒ Financing income- the growth engine
The loan book grew marginally to | 2640 crore from | 2599 crore.
The housing finance portfolio has increased to | 350 crore from |
185 crore in Q1FY12, which is quite sharp. Financing and treasury
income declined to | 276 crore from | 295 crore. We believe this
may be due to lower treasury performance. We believe until
insurance starts contributing and market conditions revive, financing
income is expected to contribute to overall topline.
ƒ Market share stable, client volume increases…
Edelweiss reported an average daily turnover of | 5300 crore, a
sequential rise of | 110 crore. The market share has declined to
~3.6% from 3.8% in Q1FY12. However, client volumes have
increased from | 2350 crore to | 2650 crore leading to 8% QoQ rise
in fee income to | 104 crore from | 97 crore. The agency business,
which had a share of 33% in total revenues in FY11, has declined to
27%. This should decline further due to increasing interest income
and future insurance business contribution.
V a l u a t i o n
We believe Edelweiss will report a profit of | 30-40 crore for the next few
quarters. Also, with weak market sentiments, investment banking and
turnover will dip, hampering agency based fee income. Return ratios are
expected to be subdued at 7-8% RoE for the next couple of years leaving
lesser scope for the stock and sector to emerge out of underperformance
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