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A t t r a c t i v e r i s k - r e w a r d r a t i o …
Major highlights of the bank’s performance were healthy NIM, decent
business growth, stable asset quality and strong return ratios. NII grew
10.7% YoY ahead of our expectations to | 514.9 crore (our estimate: |
473.6 crore) as NIM improved by 32 bps QoQ to 3.2%. Business growth
was in line with industry at 18.8% YoY. Non interest income was subdued
with a 4.7% YoY dip to | 113.4 crore. However, the bank expects a pickup of recovery in written off a/c, which will support non interest income
growth. Asset quality was stable as the GNPA ratio was acceptable at
1.9%. Provisions were in line with our estimate at | 81.3 crore. The strong
all-round performance of the bank has supported 20.5% YoY PAT growth
to | 193.6 crore (our estimate: | 184.7 crore). We expect the bank to
register growth at 18% CAGR over FY11-13E to | 847.3 crore.
ƒ Better than expected asset quality lifts bank’s performance
The bank has shifted all its accounts to system based NPA
recognition in Q2FY12 that was a cause for concern due to uncertain
asset quality. However, stable asset quality with GNPA rising slightly
by | 33 crore QoQ in absolute terms to | 831 crore surprised
positively. GNPA ratio stood at 1.9% while NNPA ratio came at 1.2%
with PCR of 77%. The bank is not experiencing any concern so far
from the power sector where its exposure is high at 18%. However,
we remain cautious and have factored in GNPA ratio at 2.0% and
NNPA ratio at 1.2% for FY12E.
ƒ Stable business growth and healthy NIM expected for FY12E
The bank recorded 17% YoY credit growth to | 42723 crore while
deposits grew 20% YoY to | 64235 crore. NIM improved 32 bps
QoQ to 3.2% in Q2FY12 on account of 64bps jump in YoA to 12%,
while CoD increased 26bps to 7%. The management expects credit
growth around 18-20% for FY12E while maintaining NIM of ~3%.
V a l u a t i o n
At the CMP of | 81, the bank is trading at attractive valuation of 0.7x
FY13E ABV. It has been consistently reporting RoA of ~1% and RoE of
~20% for past 13 quarters. High power sector exposure has restricted
rich valuations but it could improve as some uncertainty over asset
quality is clear after shifting to system based NPA recognition. We value
Dena at 1x FY13E ABV and recommend BUY with target price of | 120
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
A t t r a c t i v e r i s k - r e w a r d r a t i o …
Major highlights of the bank’s performance were healthy NIM, decent
business growth, stable asset quality and strong return ratios. NII grew
10.7% YoY ahead of our expectations to | 514.9 crore (our estimate: |
473.6 crore) as NIM improved by 32 bps QoQ to 3.2%. Business growth
was in line with industry at 18.8% YoY. Non interest income was subdued
with a 4.7% YoY dip to | 113.4 crore. However, the bank expects a pickup of recovery in written off a/c, which will support non interest income
growth. Asset quality was stable as the GNPA ratio was acceptable at
1.9%. Provisions were in line with our estimate at | 81.3 crore. The strong
all-round performance of the bank has supported 20.5% YoY PAT growth
to | 193.6 crore (our estimate: | 184.7 crore). We expect the bank to
register growth at 18% CAGR over FY11-13E to | 847.3 crore.
ƒ Better than expected asset quality lifts bank’s performance
The bank has shifted all its accounts to system based NPA
recognition in Q2FY12 that was a cause for concern due to uncertain
asset quality. However, stable asset quality with GNPA rising slightly
by | 33 crore QoQ in absolute terms to | 831 crore surprised
positively. GNPA ratio stood at 1.9% while NNPA ratio came at 1.2%
with PCR of 77%. The bank is not experiencing any concern so far
from the power sector where its exposure is high at 18%. However,
we remain cautious and have factored in GNPA ratio at 2.0% and
NNPA ratio at 1.2% for FY12E.
ƒ Stable business growth and healthy NIM expected for FY12E
The bank recorded 17% YoY credit growth to | 42723 crore while
deposits grew 20% YoY to | 64235 crore. NIM improved 32 bps
QoQ to 3.2% in Q2FY12 on account of 64bps jump in YoA to 12%,
while CoD increased 26bps to 7%. The management expects credit
growth around 18-20% for FY12E while maintaining NIM of ~3%.
V a l u a t i o n
At the CMP of | 81, the bank is trading at attractive valuation of 0.7x
FY13E ABV. It has been consistently reporting RoA of ~1% and RoE of
~20% for past 13 quarters. High power sector exposure has restricted
rich valuations but it could improve as some uncertainty over asset
quality is clear after shifting to system based NPA recognition. We value
Dena at 1x FY13E ABV and recommend BUY with target price of | 120
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