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Net interest income was in line with estimates at INR10.9bn, driven by
28% y‐o‐y growth in the loan book. NIMs declined 12‐bp sequentially,
driven by interest income reversal of INR190mn on account of stressed
assets during the Dec11 quarter. Stable operating costs along with a
reversal in foreign exchange provision drove 68% y‐o‐y growth in net
profit, ahead of estimates. GNPLs increased to INR6bn on account of
slippage in one project. Management maintains the stress is limited to
only two projects. We maintain our estimates and forecast a CAGR of
22% in loans over FY12‐FY14. We forecast NIM to average at 3.9% over
FY12‐FY14. We lower our TP to INR224, as we roll it over to Dec12.
Maintain Buy. A higher‐than‐estimated rise in NPLs and sharp
slowdown in loan growth are risk factors.
Growth in loan book continues, disbursements and sanctions pick up
Balance sheet loans grew 28% y‐o‐y, driven by generation loans and sharp pick
up in short‐term loans. The 21% q‐o‐q growth in sanctions was encouraging,
after modest growth during 1HFY12. Disbursements grew 40% y‐o‐y during the
quarter, driven by the generation segment and APDRP‐related disbursements.
We maintain our forecast of a CAGR of 22% in loans, driven by a CAGR of 13%
in disbursements between FY12 and FY14.
Spreads stable; NIMs decline 12‐bp due to interest reversal
Spreads were stable sequentially; however, NIMs declined by 12‐bp q‐o‐q due
to interest reversal of INR190mn on account of a stressed asset. Adjusted for
interest reversals, NIMs would have increased sequentially. The pressure on
spreads is likely to ease in FY13f with improvement in system liquidity, equity
issuance and higher re‐pricing of assets (cINR330bn) than liabilities (cINR54bn).
We forecast stable NIMs, at a three‐year mean of 3.9% over FY12‐FY14.
Higher net profit driven by reversal of foreign exchange provisions
POWF reversed INR4.1bn of foreign exchange provisions during the quarter out
of the INR6bn recognized during 1HFY12, post adjusting the INR1.9bn booked
during the Dec11 quarter. Operating costs remained stable at INR2.9bn. Thus,
net profit growth of 68% y‐o‐y and 164% q‐o‐q was higher than estimates. We
maintain our estimates and forecast a CAGR of 20% in earnings for POWF
between FY12 and FY14.
Rise in GNPLs; management maintains stress is limited to two projects
GNPLs increased to INR6.3bn during the quarter from INR130mn outstanding at
end Sep11 due to slippage in a large project in Andhra Pradesh. The project is
facing issues on account of unavailability of coal. Management maintains the
stress is limited to just this project and another wind‐based project.
Lower Dec12 TP to INR224; valuations inexpensive
Our target is based on the DCF, P/E and P/B methods. Our DCF‐based fair value
stands at INR242/share. We rollover the target price to Dec12 and lower it to
INR224. Valuations at 1.2x one‐year forward P/B remain inexpensive. Maintain
Buy. Higher‐than‐estimated NPLs and a sharp slowdown in loan growth are risk
factors.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Net interest income was in line with estimates at INR10.9bn, driven by
28% y‐o‐y growth in the loan book. NIMs declined 12‐bp sequentially,
driven by interest income reversal of INR190mn on account of stressed
assets during the Dec11 quarter. Stable operating costs along with a
reversal in foreign exchange provision drove 68% y‐o‐y growth in net
profit, ahead of estimates. GNPLs increased to INR6bn on account of
slippage in one project. Management maintains the stress is limited to
only two projects. We maintain our estimates and forecast a CAGR of
22% in loans over FY12‐FY14. We forecast NIM to average at 3.9% over
FY12‐FY14. We lower our TP to INR224, as we roll it over to Dec12.
Maintain Buy. A higher‐than‐estimated rise in NPLs and sharp
slowdown in loan growth are risk factors.
Growth in loan book continues, disbursements and sanctions pick up
Balance sheet loans grew 28% y‐o‐y, driven by generation loans and sharp pick
up in short‐term loans. The 21% q‐o‐q growth in sanctions was encouraging,
after modest growth during 1HFY12. Disbursements grew 40% y‐o‐y during the
quarter, driven by the generation segment and APDRP‐related disbursements.
We maintain our forecast of a CAGR of 22% in loans, driven by a CAGR of 13%
in disbursements between FY12 and FY14.
Spreads stable; NIMs decline 12‐bp due to interest reversal
Spreads were stable sequentially; however, NIMs declined by 12‐bp q‐o‐q due
to interest reversal of INR190mn on account of a stressed asset. Adjusted for
interest reversals, NIMs would have increased sequentially. The pressure on
spreads is likely to ease in FY13f with improvement in system liquidity, equity
issuance and higher re‐pricing of assets (cINR330bn) than liabilities (cINR54bn).
We forecast stable NIMs, at a three‐year mean of 3.9% over FY12‐FY14.
Higher net profit driven by reversal of foreign exchange provisions
POWF reversed INR4.1bn of foreign exchange provisions during the quarter out
of the INR6bn recognized during 1HFY12, post adjusting the INR1.9bn booked
during the Dec11 quarter. Operating costs remained stable at INR2.9bn. Thus,
net profit growth of 68% y‐o‐y and 164% q‐o‐q was higher than estimates. We
maintain our estimates and forecast a CAGR of 20% in earnings for POWF
between FY12 and FY14.
Rise in GNPLs; management maintains stress is limited to two projects
GNPLs increased to INR6.3bn during the quarter from INR130mn outstanding at
end Sep11 due to slippage in a large project in Andhra Pradesh. The project is
facing issues on account of unavailability of coal. Management maintains the
stress is limited to just this project and another wind‐based project.
Lower Dec12 TP to INR224; valuations inexpensive
Our target is based on the DCF, P/E and P/B methods. Our DCF‐based fair value
stands at INR242/share. We rollover the target price to Dec12 and lower it to
INR224. Valuations at 1.2x one‐year forward P/B remain inexpensive. Maintain
Buy. Higher‐than‐estimated NPLs and a sharp slowdown in loan growth are risk
factors.
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