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S t r o n g p e r f o r m a n c e a nd c h e a p v a l u a t i o n s …
Dena Bank witnessed strong Q1FY12 PAT growth of 21% YoY (7% QoQ)
from | 139 crore to | 168 crore on the back of 16.4% YoY business
growth, strong NII growth and fall in credit cost. NII grew 24% YoY from |
360 crore to | 447 crore in line with estimates. Deposits grew 19% YoY
(1.5% QoQ de-growth) to | 63,253 crore and advances by 13% YoY (5%
QoQ de-growth) to | 42,871 crore. CASA remained stable at 35.2% and
NIM stood at 2.9% (@3.1% if we include mutual fund income that the
bank has reported as other income). Provisions were lower than expected
as the bank is yet to transfer loans below | 50 lakh to system based NPA.
We expect PAT of | 847 crore in FY13E with 17.7% CAGR over FY11-13E.
ƒ Impact of system based NPA to come in Q2FY12
The bank has maintained QoQ GNPA ratio at 1.86% (in absolute terms
improved from | 842 crore to | 797 crore) and improved QoQ NNPA
ratio from 1.22% to 1.08% (from | 549 crore to | 458 crore). It will shift
to full system based recognition in Q2FY12 (portfolio of ~| 8800 crore is
below | 50 lakh). The bank expects to be at FY11 GNPA levels despite
full transformation. Hence, it expects only 0.5% slippage from this
portfolio. We expect addition of | 80-100 crore in Q2FY12, in line with
industry trend. PCR stands strong at 77.9%. We expect GNPA at 2% for
FY12E and FY13E while NNPA is at 1.2% for FY12E and 1.1% for FY13E.
ƒ Exposure to power sector affecting valuations
The major concern for such low valuations is the bank’s exposure to the
power sector. It has exposure of | 8295 crore that is 19% of total
advances. Repayment of ~| 1500 crore of short-term SEB loans (total |
5635 crore) is due in Q2FY12. This will trim their exposure further. The
bank is categorically concerned. So, fresh sanctions towards this sector
are on halt. The bank is disbursing only towards old sanctioned limits.
V a l u a t i o n
We believe concerns over power sector exposure are overdone and it
looks a good value proposition for long-term investment. At the CMP of |
86, it is trading at an attractive 0.7x FY13E ABV, 2.9x FY13E EPS. We
expect RoA of 0.9% and RoE of 19% for FY13E. This is one of our top
midcap bank picks, which we value at 1x FY13E ABV to arrive at a target
price of | 120. We recommend a BUY rating. The downside risk to our call
would be higher than expected slippages and lower business growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S t r o n g p e r f o r m a n c e a nd c h e a p v a l u a t i o n s …
Dena Bank witnessed strong Q1FY12 PAT growth of 21% YoY (7% QoQ)
from | 139 crore to | 168 crore on the back of 16.4% YoY business
growth, strong NII growth and fall in credit cost. NII grew 24% YoY from |
360 crore to | 447 crore in line with estimates. Deposits grew 19% YoY
(1.5% QoQ de-growth) to | 63,253 crore and advances by 13% YoY (5%
QoQ de-growth) to | 42,871 crore. CASA remained stable at 35.2% and
NIM stood at 2.9% (@3.1% if we include mutual fund income that the
bank has reported as other income). Provisions were lower than expected
as the bank is yet to transfer loans below | 50 lakh to system based NPA.
We expect PAT of | 847 crore in FY13E with 17.7% CAGR over FY11-13E.
ƒ Impact of system based NPA to come in Q2FY12
The bank has maintained QoQ GNPA ratio at 1.86% (in absolute terms
improved from | 842 crore to | 797 crore) and improved QoQ NNPA
ratio from 1.22% to 1.08% (from | 549 crore to | 458 crore). It will shift
to full system based recognition in Q2FY12 (portfolio of ~| 8800 crore is
below | 50 lakh). The bank expects to be at FY11 GNPA levels despite
full transformation. Hence, it expects only 0.5% slippage from this
portfolio. We expect addition of | 80-100 crore in Q2FY12, in line with
industry trend. PCR stands strong at 77.9%. We expect GNPA at 2% for
FY12E and FY13E while NNPA is at 1.2% for FY12E and 1.1% for FY13E.
ƒ Exposure to power sector affecting valuations
The major concern for such low valuations is the bank’s exposure to the
power sector. It has exposure of | 8295 crore that is 19% of total
advances. Repayment of ~| 1500 crore of short-term SEB loans (total |
5635 crore) is due in Q2FY12. This will trim their exposure further. The
bank is categorically concerned. So, fresh sanctions towards this sector
are on halt. The bank is disbursing only towards old sanctioned limits.
V a l u a t i o n
We believe concerns over power sector exposure are overdone and it
looks a good value proposition for long-term investment. At the CMP of |
86, it is trading at an attractive 0.7x FY13E ABV, 2.9x FY13E EPS. We
expect RoA of 0.9% and RoE of 19% for FY13E. This is one of our top
midcap bank picks, which we value at 1x FY13E ABV to arrive at a target
price of | 120. We recommend a BUY rating. The downside risk to our call
would be higher than expected slippages and lower business growth.
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