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P r o v i s i o n s h i g h e r b u t p r o f i t m a i n t a i n e d …
Dena Bank surmounted the concerns on high power exposure and
reported strong results with PAT growth of 20.3% YoY to | 186.7 crore.
Core business boosted profitability with incremental NII escalating by
| 74.8 crore YoY while incremental PAT rose by | 31.5 crore YoY. Credit
growth was in line with estimates at 15.7% YoY to | 47928 crore. Noninterest income growth was steady at 5.4% YoY to | 134 crore. However,
the bank expects strong recovery of ~| 60 crore in Q4FY12E. The C/I ratio
has swiftly declined from 47.4% in Q4FY11 to 41.8% in Q3FY12. On the
back of strong NIM, we have revised NII estimates marginally upwards for
FY12E resulting in PAT CAGR of 20.3% to | 884.4 crore over FY11-13E.
ƒ NII boosts profitability while NIM trends upward…
Net interest margin was the positive surprise as it inched up 6 bps
QoQ and 11 bps YoY to 3.33%. On the back of strong NIM, NII grew
16% YoY and 5% QoQ to | 541 crore (I direct estimate: | 528 crore).
Over the past two years, NII witnessed robust CAGR of 38.3% as
NIM improved sharply from 2.5% in Q3FY10 to 3.3% in Q3FY12. We
estimate 17.8% CAGR in NII to | 2447.2 crore in FY11-13E.
ƒ Clouds of uncertainty over asset quality getting clearer…
There were concerns that high power exposure could result in huge
provisioning, thereby denting profitability. However, the bank was
able to manage asset quality as GNPA grew 6.6% QoQ to | 885
crore. The GNPA and NNPA ratio came at 1.9% and 1.1%
respectively. Provisions grew 45% YoY to | 124 crore(PCR of 76.6%)
The outstanding restructured book increased by | 270 crore to
| 1800 crore, constituting 3.8% of the credit book. Uttar Haryana
SEB loan of | 127 crore got restructured wherein the bank did not
suffer any NPV sacrifice. Air India exposure of | 200 crore and
Rajasthan SEB exposure of | 1100 crore may get restructured.
V a l u a t i o n
At the CMP of | 79, the bank is still trading at an attractive price of 0.6x
FY13E ABV and 2.5x EPS. It has posted excellent return ratios with RoA of
1% & RoE of 20% in the past 14 quarters. Stake sale of 5% to LIC may act
as a trigger for the stock. Dena Bank is one of our top picks. We reinstate
the higher multiple of 0.8x FY13E ABV as core business drives profitability
and the asset quality picture gets clearer. We revise TP to | 97.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CLICK here for PDF post link
P r o v i s i o n s h i g h e r b u t p r o f i t m a i n t a i n e d …
Dena Bank surmounted the concerns on high power exposure and
reported strong results with PAT growth of 20.3% YoY to | 186.7 crore.
Core business boosted profitability with incremental NII escalating by
| 74.8 crore YoY while incremental PAT rose by | 31.5 crore YoY. Credit
growth was in line with estimates at 15.7% YoY to | 47928 crore. Noninterest income growth was steady at 5.4% YoY to | 134 crore. However,
the bank expects strong recovery of ~| 60 crore in Q4FY12E. The C/I ratio
has swiftly declined from 47.4% in Q4FY11 to 41.8% in Q3FY12. On the
back of strong NIM, we have revised NII estimates marginally upwards for
FY12E resulting in PAT CAGR of 20.3% to | 884.4 crore over FY11-13E.
ƒ NII boosts profitability while NIM trends upward…
Net interest margin was the positive surprise as it inched up 6 bps
QoQ and 11 bps YoY to 3.33%. On the back of strong NIM, NII grew
16% YoY and 5% QoQ to | 541 crore (I direct estimate: | 528 crore).
Over the past two years, NII witnessed robust CAGR of 38.3% as
NIM improved sharply from 2.5% in Q3FY10 to 3.3% in Q3FY12. We
estimate 17.8% CAGR in NII to | 2447.2 crore in FY11-13E.
ƒ Clouds of uncertainty over asset quality getting clearer…
There were concerns that high power exposure could result in huge
provisioning, thereby denting profitability. However, the bank was
able to manage asset quality as GNPA grew 6.6% QoQ to | 885
crore. The GNPA and NNPA ratio came at 1.9% and 1.1%
respectively. Provisions grew 45% YoY to | 124 crore(PCR of 76.6%)
The outstanding restructured book increased by | 270 crore to
| 1800 crore, constituting 3.8% of the credit book. Uttar Haryana
SEB loan of | 127 crore got restructured wherein the bank did not
suffer any NPV sacrifice. Air India exposure of | 200 crore and
Rajasthan SEB exposure of | 1100 crore may get restructured.
V a l u a t i o n
At the CMP of | 79, the bank is still trading at an attractive price of 0.6x
FY13E ABV and 2.5x EPS. It has posted excellent return ratios with RoA of
1% & RoE of 20% in the past 14 quarters. Stake sale of 5% to LIC may act
as a trigger for the stock. Dena Bank is one of our top picks. We reinstate
the higher multiple of 0.8x FY13E ABV as core business drives profitability
and the asset quality picture gets clearer. We revise TP to | 97.
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