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India Equity Research Reports, IPO and Stock News
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Industry best return ratios: IIB’s ROAs have moved up from 0.6% in FY09 to
industry best levels of 1.6% in FY12. With steady growth, IIB has been able to
deliver solid revenue momentum with high margins and again industry best
fees/assets ratio of ~2.0%. The bank’s growth momentum has been caliberated
and slowing system growth will not have a significant growth impact as well.
Though IIB has out performed peers ,we believe overall market weakness is
presenting a good opputunity to enter a secular growth story.
More levers for further ROA improvement: Despite its industry best ROAs,
further room to improve profitability is the key reason for our positive outlook.
We believe further margin accretion through improving SA franchise and
addition to fee income avenues will aid ROAs in the near term. Over the medium
term, we believe, cost optimisation could drive some ROA improvement after
new branch strain reduces in two years.
Asset quality risks low: Asset quality risks remain in the near term from the CV
portfolio. However, very limited mining exposure and improving freight rates
provides relative comfort. Longer term, negligible infra exposure reduces
chances of any large negative surprise. Delivery on CASA growth is getting
incrementally difficult, with high rates in the near term. However, we believe SA
de-regulation would aid account acquisitions.
BUY, PT ‐ Rs315/share: Our Sep-12 PT of Rs315/share is based on two-stage
Gordon growth model implying 3.0x Sep-12 P/B. Though IIB has outperformed
peers, we believe current valuations are not expensive, considering ~28% EPS
growth over FY11-14E and potential for further ROA/ROE improvement.
Valuations relative to other defensive stocks are also at a substantial discount
(~20-30%).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Industry best return ratios: IIB’s ROAs have moved up from 0.6% in FY09 to
industry best levels of 1.6% in FY12. With steady growth, IIB has been able to
deliver solid revenue momentum with high margins and again industry best
fees/assets ratio of ~2.0%. The bank’s growth momentum has been caliberated
and slowing system growth will not have a significant growth impact as well.
Though IIB has out performed peers ,we believe overall market weakness is
presenting a good opputunity to enter a secular growth story.
More levers for further ROA improvement: Despite its industry best ROAs,
further room to improve profitability is the key reason for our positive outlook.
We believe further margin accretion through improving SA franchise and
addition to fee income avenues will aid ROAs in the near term. Over the medium
term, we believe, cost optimisation could drive some ROA improvement after
new branch strain reduces in two years.
Asset quality risks low: Asset quality risks remain in the near term from the CV
portfolio. However, very limited mining exposure and improving freight rates
provides relative comfort. Longer term, negligible infra exposure reduces
chances of any large negative surprise. Delivery on CASA growth is getting
incrementally difficult, with high rates in the near term. However, we believe SA
de-regulation would aid account acquisitions.
BUY, PT ‐ Rs315/share: Our Sep-12 PT of Rs315/share is based on two-stage
Gordon growth model implying 3.0x Sep-12 P/B. Though IIB has outperformed
peers, we believe current valuations are not expensive, considering ~28% EPS
growth over FY11-14E and potential for further ROA/ROE improvement.
Valuations relative to other defensive stocks are also at a substantial discount
(~20-30%).
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