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Reliance Capital: L o w e r g r o w t h a n d n e g a t i v e s i n t h e p r i c e …
The consolidated profit of Reliance Capital grew 68% YoY to | 106 crore
in line with our estimates. The total income rose marginally by 5.3%
QoQ to | 1368 crore. Post the Q3 results and market conditions, which
have prevented any stake sale in Q4, we have revised down our total
income and PAT estimates significantly. However, we believe the
current steep correction in prices has made the stock a cheap buy.
Asset management becomes top performer for the quarter – PBT surged
substantially by 30% to | 91.3 crore despite AUM dipping to | 1021 billion
from | 1087 billion sequentially. PBT margins improved sequentially from
39% to 49%. The surge was mainly due to a shift of the portfolio in favour
of retail debt AUM that now forms 19% of debt AUM as against 5.7%
(December 2009).
Clean-up of consumer finance book continues, growth is strong- The
loan book grew 37% YoY and 7% QoQ to | 1070 crore generating PBT of
| 79 crore with nearly 95% of the book being secured. Gross NPLs have
declined 63% to | 190 crore and provisioning continues to decrease. This
quarter, it declined by 60% to | 27.6 crore.
Broking segment – low yield saga continues- Average daily volumes
rose to | 1800 crore in line with markets leading to market share being
maintained. Distribution business generated income of | 27.4 vs. | 8.6
crore on gold coin selling and generated PBT of | 7.1 crore vs. | 2.5 crore.
Life insurance, general insurance – marginal growth seen – Its market
share in private sector life insurance dipped to 8% from 8.5% in new
business premium. NBP declined to | 593 crore in Q3FY11 against | 921
crore in Q3FY10 whereas renewal premium has gone up by 25% YoY to |
860 crore. GWP at | 418 crore was flat sequentially. The company again
reported a loss of | 24.2 crore vs. | 28.2 crore loss in Q2FY11.
V a l u a t i o n
Return ratios will continue to remain at sub-10% levels for the next two
years. The recent correction makes risk reward favourable for the stock.
Capital gains losing significance to build operational profits continued and
reduced volatility in earnings. We have revised our SOTP target price to |
540 with discounted multiples given to insurance and consumer finance.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Capital: L o w e r g r o w t h a n d n e g a t i v e s i n t h e p r i c e …
The consolidated profit of Reliance Capital grew 68% YoY to | 106 crore
in line with our estimates. The total income rose marginally by 5.3%
QoQ to | 1368 crore. Post the Q3 results and market conditions, which
have prevented any stake sale in Q4, we have revised down our total
income and PAT estimates significantly. However, we believe the
current steep correction in prices has made the stock a cheap buy.
Asset management becomes top performer for the quarter – PBT surged
substantially by 30% to | 91.3 crore despite AUM dipping to | 1021 billion
from | 1087 billion sequentially. PBT margins improved sequentially from
39% to 49%. The surge was mainly due to a shift of the portfolio in favour
of retail debt AUM that now forms 19% of debt AUM as against 5.7%
(December 2009).
Clean-up of consumer finance book continues, growth is strong- The
loan book grew 37% YoY and 7% QoQ to | 1070 crore generating PBT of
| 79 crore with nearly 95% of the book being secured. Gross NPLs have
declined 63% to | 190 crore and provisioning continues to decrease. This
quarter, it declined by 60% to | 27.6 crore.
Broking segment – low yield saga continues- Average daily volumes
rose to | 1800 crore in line with markets leading to market share being
maintained. Distribution business generated income of | 27.4 vs. | 8.6
crore on gold coin selling and generated PBT of | 7.1 crore vs. | 2.5 crore.
Life insurance, general insurance – marginal growth seen – Its market
share in private sector life insurance dipped to 8% from 8.5% in new
business premium. NBP declined to | 593 crore in Q3FY11 against | 921
crore in Q3FY10 whereas renewal premium has gone up by 25% YoY to |
860 crore. GWP at | 418 crore was flat sequentially. The company again
reported a loss of | 24.2 crore vs. | 28.2 crore loss in Q2FY11.
V a l u a t i o n
Return ratios will continue to remain at sub-10% levels for the next two
years. The recent correction makes risk reward favourable for the stock.
Capital gains losing significance to build operational profits continued and
reduced volatility in earnings. We have revised our SOTP target price to |
540 with discounted multiples given to insurance and consumer finance.
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