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IDFC (IDFC)
Banks/Financial Institutions
Core performance in line. IDFC reported PAT of Rs5.2 bn, up 55% yoy. Large capital
gains (Rs2.6 bn, i.e. 38% of PBT) buoyed earnings; core income was down 3% yoy and
1% above estimates. Key highlights of the business: Moderate loan growth (up 5%
qoq), stable NIM, fees up 17% yoy driven by lending-related fees, provisions up 58%
yoy even as NPLs were stable. We tweak estimates, retain price target of Rs150. Revise
rating to ADD from BUY given the moderate upside to our TP after the recent rally.
Loan book traction picks up, albeit moderately
IDFC reported loan book of Rs396 bn up 15% yoy and 5% qoq. Gross disbursements were down
68% yoy to Rs36 bn. Energy remained the largest contributory to growth driving 44% of the
increase in outstanding disbursements.
Repayment rate (repayments/ opening loan book) declined qoq to 4.6% from 7.4% in 1QFY12
and 19.7% in 2QFY11. We note that the competitive scenario has been favorable over the last
few quarters (post the base rate hike by SBI and other public banks); we hence expect most
repayments to be in normal course.
IDFC has guided for moderate loan growth (15% yoy) in 2012E on the back of challenges in the
macro environment. YTD growth is 6%; we believe that it may not be challenging for IDFC to
deliver balance about 10% growth over the next two quarters in light of lower repayment rates
even if disbursements remain weak. We expect IDFC to deliver 17% yoy growth in FY2012E and
21% growth in FY2013E; changes in the operating environment can provide significant sensitivity
to growth and earnings.
Margins stable qoq
IDFC reported NIM (as per KS estimates) of 4.3% over the last two quarters, somewhat higher
than 3.9% in 2QFY11. The company has successfully passed on rise in lending rates to its
customers. IDFC has increased dependence on bank loans and foreign currency loans during the
quarter. IDFC booked loan-related fees of about Rs480 mn as compared to Rs310 mn in 1QFY12.
Asset management fees were almost stable at Rs650 mn while income from investment banking
and broking remains low at Rs180 mn.
Tweaking estimates, retain price target of Rs150
After the results, we are tweaking our estimates up by 2% for FY2012E. Our SOTP-based target
price of Rs150 (unchanged) provides 16% upside from the current levels. We therefore revise our
rating to ADD from BUY. We believe that improvement in the macro environment remains a key
catalyst for IDFC’s growth traction and stock price performance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IDFC (IDFC)
Banks/Financial Institutions
Core performance in line. IDFC reported PAT of Rs5.2 bn, up 55% yoy. Large capital
gains (Rs2.6 bn, i.e. 38% of PBT) buoyed earnings; core income was down 3% yoy and
1% above estimates. Key highlights of the business: Moderate loan growth (up 5%
qoq), stable NIM, fees up 17% yoy driven by lending-related fees, provisions up 58%
yoy even as NPLs were stable. We tweak estimates, retain price target of Rs150. Revise
rating to ADD from BUY given the moderate upside to our TP after the recent rally.
Loan book traction picks up, albeit moderately
IDFC reported loan book of Rs396 bn up 15% yoy and 5% qoq. Gross disbursements were down
68% yoy to Rs36 bn. Energy remained the largest contributory to growth driving 44% of the
increase in outstanding disbursements.
Repayment rate (repayments/ opening loan book) declined qoq to 4.6% from 7.4% in 1QFY12
and 19.7% in 2QFY11. We note that the competitive scenario has been favorable over the last
few quarters (post the base rate hike by SBI and other public banks); we hence expect most
repayments to be in normal course.
IDFC has guided for moderate loan growth (15% yoy) in 2012E on the back of challenges in the
macro environment. YTD growth is 6%; we believe that it may not be challenging for IDFC to
deliver balance about 10% growth over the next two quarters in light of lower repayment rates
even if disbursements remain weak. We expect IDFC to deliver 17% yoy growth in FY2012E and
21% growth in FY2013E; changes in the operating environment can provide significant sensitivity
to growth and earnings.
Margins stable qoq
IDFC reported NIM (as per KS estimates) of 4.3% over the last two quarters, somewhat higher
than 3.9% in 2QFY11. The company has successfully passed on rise in lending rates to its
customers. IDFC has increased dependence on bank loans and foreign currency loans during the
quarter. IDFC booked loan-related fees of about Rs480 mn as compared to Rs310 mn in 1QFY12.
Asset management fees were almost stable at Rs650 mn while income from investment banking
and broking remains low at Rs180 mn.
Tweaking estimates, retain price target of Rs150
After the results, we are tweaking our estimates up by 2% for FY2012E. Our SOTP-based target
price of Rs150 (unchanged) provides 16% upside from the current levels. We therefore revise our
rating to ADD from BUY. We believe that improvement in the macro environment remains a key
catalyst for IDFC’s growth traction and stock price performance.
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