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Ex-exceptionals, In line
INBK’s Q3FY12 performance was in line excluding the reversal of deferred tax
provision (Rs523mn). Overall, a stable quarter with healthy NIMs (3.5%),
stabilising slippages (1.8%) and decent loan growth (19%). At 1.0x FY13E
Adjusted BPS, the stock is attractively priced considering strong return ratios
(RoA of ~1.3%, RoE of ~20%+) and asset quality position better than peers.
We maintain Buy.
Mixed asset quality trends: Asset quality trends were mixed during Q3FY12
as GNPA increased by 14% QoQ even as slippage rate was stable at 1.8% and
write-offs were a tad higher. A major part of the incremental slippages came
from the SME segment. Meanwhile, restructured loans grew by just 9% QoQ
to Rs56bn (6.3% of loans) led by telecom exposure. Slippages in restructured
assets at ~6% are lowest among PSB peers. Provision coverage ratio remains
healthy at 76.5 %. We maintain our view that the restructured assets are likely
to rise in quarters ahead led by stressed sectors (infrastructure, SEBs etc).
NIM contracts QoQ: Reported NIMs of 3.6% reflects a contraction of ~20bps
QoQ led by lower yields on advances sequentially (could be reversal of interest
income). Although, the calculated NIM is largely stable QoQ. The loan book
grew by 19% YoY to Rs880bn led by agriculture loans (26% YoY) large
corporate segment (20% YoY) while the management seems to be turning
cautious on SME segment (8% YoY).
Tax provision reversal boosts bottomline: The performance at PPP was
inline with our estimates, though the bottomline came in above our estimate
led by a reversal of deferred tax provisions (Rs523mn). We are not clear on the
nature of these reversals but the management indicated that these provisions
were created in earlier years and reversed in the current quarter.
Capital raising plans postponed: The management clarified that the capital
raising plans (through an FPO, duly approved) has been postponed as of now
due to unfavorable market conditions. Even without the capital raising, the
capital adequacy is comfortable at 13.5 % (Tier I: 11.19 %) if the current year
profit is considered. Moreover, the bank has headroom to raise Tier II capital of
about Rs62bn.
Attractively priced: We have tweaked our earnings estimates to factor in
incremental trends and additional information. At current market price of
Rs234, the stock trades at 4.3x FY2013E EPS and 1.0x FY2013E ABVPS. In light
of strong return ratios (RoA of ~1.3%, RoE of ~20%+) the stock is trading at
attractive valuations currently. Our revised estimates imply a fair value
estimate of Rs270, an upside of 15% from current level. We maintain our Buy
recommendation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ex-exceptionals, In line
INBK’s Q3FY12 performance was in line excluding the reversal of deferred tax
provision (Rs523mn). Overall, a stable quarter with healthy NIMs (3.5%),
stabilising slippages (1.8%) and decent loan growth (19%). At 1.0x FY13E
Adjusted BPS, the stock is attractively priced considering strong return ratios
(RoA of ~1.3%, RoE of ~20%+) and asset quality position better than peers.
We maintain Buy.
Mixed asset quality trends: Asset quality trends were mixed during Q3FY12
as GNPA increased by 14% QoQ even as slippage rate was stable at 1.8% and
write-offs were a tad higher. A major part of the incremental slippages came
from the SME segment. Meanwhile, restructured loans grew by just 9% QoQ
to Rs56bn (6.3% of loans) led by telecom exposure. Slippages in restructured
assets at ~6% are lowest among PSB peers. Provision coverage ratio remains
healthy at 76.5 %. We maintain our view that the restructured assets are likely
to rise in quarters ahead led by stressed sectors (infrastructure, SEBs etc).
NIM contracts QoQ: Reported NIMs of 3.6% reflects a contraction of ~20bps
QoQ led by lower yields on advances sequentially (could be reversal of interest
income). Although, the calculated NIM is largely stable QoQ. The loan book
grew by 19% YoY to Rs880bn led by agriculture loans (26% YoY) large
corporate segment (20% YoY) while the management seems to be turning
cautious on SME segment (8% YoY).
Tax provision reversal boosts bottomline: The performance at PPP was
inline with our estimates, though the bottomline came in above our estimate
led by a reversal of deferred tax provisions (Rs523mn). We are not clear on the
nature of these reversals but the management indicated that these provisions
were created in earlier years and reversed in the current quarter.
Capital raising plans postponed: The management clarified that the capital
raising plans (through an FPO, duly approved) has been postponed as of now
due to unfavorable market conditions. Even without the capital raising, the
capital adequacy is comfortable at 13.5 % (Tier I: 11.19 %) if the current year
profit is considered. Moreover, the bank has headroom to raise Tier II capital of
about Rs62bn.
Attractively priced: We have tweaked our earnings estimates to factor in
incremental trends and additional information. At current market price of
Rs234, the stock trades at 4.3x FY2013E EPS and 1.0x FY2013E ABVPS. In light
of strong return ratios (RoA of ~1.3%, RoE of ~20%+) the stock is trading at
attractive valuations currently. Our revised estimates imply a fair value
estimate of Rs270, an upside of 15% from current level. We maintain our Buy
recommendation.
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