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EARNINGS REVIEW
Infrastructure Development Finance Co.
Neutral
Below expectations; loan growth slows on macro; maintain Neutral
Facing pressures from all sides
IDFC reported 1QFY12 PAT of Rs3.13 bn, down 6% yoy and 20% below our
estimates, the variance driven by lower gains, fee income and higher
provisions. Key highlights: (1) Loan growth slowed – flat qoq, up 30% yoy,
as disbursements fell 50% yoy. (2) Excluding capital gains, net fund based
income grew +43% yoy driven by infrastructure (+41% yoy) and treasury
income (+64% yoy). (3) Fee income came in 33% below GSe, declining 23%
yoy reflecting pressures across advisory, brokerage and AMC business. (4)
Consistent with banks that have reported results so far, operating
expenses came in lower than expected, declining 8% yoy.
Retain Neutral on higher valuations, lower RoE
We believe loan growth will remain muted (GSe +14% in FY12, +18% FY13)
given a tougher macro environment, higher interest rates and issues in the
power sector (surplus capacity, SEB losses and coal linkages). Note IDFC’s
power sector exposure is high at 44%. While NIM may start stabilizing for
IDFC, lower loan growth, advisory, brokerage and investment banking fees
should lead to lackluster profit growth during the year.
We reduce our EPS estimates for FY12E/FY13E/FY14E by up to 5% to
Rs9.64/11.91/14.42 respectively on the back of reported results, and our 12-m
CAMELOT-based target price to Rs140 (from Rs150) as we roll forward the
BVPS by a quarter. We retain our Neutral rating on IDFC, as we see more
value in other banks under our coverage.
Risks: upside - stronger business volumes. Downside: higher funding costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Infrastructure Development Finance Co.
Neutral
Below expectations; loan growth slows on macro; maintain Neutral
Facing pressures from all sides
IDFC reported 1QFY12 PAT of Rs3.13 bn, down 6% yoy and 20% below our
estimates, the variance driven by lower gains, fee income and higher
provisions. Key highlights: (1) Loan growth slowed – flat qoq, up 30% yoy,
as disbursements fell 50% yoy. (2) Excluding capital gains, net fund based
income grew +43% yoy driven by infrastructure (+41% yoy) and treasury
income (+64% yoy). (3) Fee income came in 33% below GSe, declining 23%
yoy reflecting pressures across advisory, brokerage and AMC business. (4)
Consistent with banks that have reported results so far, operating
expenses came in lower than expected, declining 8% yoy.
Retain Neutral on higher valuations, lower RoE
We believe loan growth will remain muted (GSe +14% in FY12, +18% FY13)
given a tougher macro environment, higher interest rates and issues in the
power sector (surplus capacity, SEB losses and coal linkages). Note IDFC’s
power sector exposure is high at 44%. While NIM may start stabilizing for
IDFC, lower loan growth, advisory, brokerage and investment banking fees
should lead to lackluster profit growth during the year.
We reduce our EPS estimates for FY12E/FY13E/FY14E by up to 5% to
Rs9.64/11.91/14.42 respectively on the back of reported results, and our 12-m
CAMELOT-based target price to Rs140 (from Rs150) as we roll forward the
BVPS by a quarter. We retain our Neutral rating on IDFC, as we see more
value in other banks under our coverage.
Risks: upside - stronger business volumes. Downside: higher funding costs.
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