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India Equity Research Reports, IPO and Stock News
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http://www.kotaksecurities.com/pdf/dmb/MorningInsight13042012.pdf
STATE BANK OF INDIA (SBI)
PRICE: RS.2224 RECOMMENDATION: BUY
TARGET PRICE: RS.2436 FY13E P/E: 11.4X; P/ABV: 2.3X
Strong NIM is likely to protect earnings, at least in near future; tier-I capital
is likely to improve to ~9% (FY12) due to Rs.79 bn capital infusion along
with ploughing back of profits. Stock has corrected almost 14% from its
recent highs and currently trades at reasonable valuation. Hence, we
upgrade the stock to BUY.
SBI has consistently delivered robust NIM during last couple of quarters.
During Q3FY12, NIM came at 4.05% (domestic NIM: 4.39%), one of the
highest in the industry on back of better asset yield while rise in cost of
funds was moderate. We believe strong NIM provides cushion to its future earnings.
Capital infusion (Rs.79 bn) along with ploughing back of FY12 profits
(post dividend payout) is likely to improve tier-I to ~9% (tier-I was at
7.59% at the end of Q3FY12). This is definitely positive for the stock, as it
was one of the reasons for its recent downgrade, by one of the rating
agency.
The biggest disappointment during Q3FY12 results came on the slippage
front (Rs.81.6 bn; 4.2% on annualized basis) which continued to remain
at elevated levels - run rate at 4%+ during last two quarters, is clearly
negative in our view. However, retail, agri and SME book did better than
previous quarter.
At the CMP of Rs.2224, stock is trading reasonable at 1.4x its FY13E adjusted book value and 7.0x its FY13E earnings, after stripping the value
of its subsidiaries. We have tweaked the earnings estimate for FY12-13E
post capital infusion by the GOI.
Stock has corrected almost 14% from its recent highs and currently
trades at reasonable valuation. Hence, we upgrade the stock to BUY with
the TP of Rs. 2436 (earlier Rs.2391) based on SOTP methodology where
core business is valued at Rs.1578 (1.6x FY13E ABV) and subsidiaries are
valued at Rs.858 (after giving 20% holding company discount).
Robust NIM on back conscious strategy; provides cushion to its
future earnings
SBI has consistently delivered robust NIM during last couple of quarters; NIM came
at 4.05% (domestic NIM: 4.39%) during Q3FY12, one of the highest in the industry.
This has come on back of better asset yield (improvement of 135 bps YoY), while
rise in cost of funds was relatively moderate (74 bps YoY).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight13042012.pdf
STATE BANK OF INDIA (SBI)
PRICE: RS.2224 RECOMMENDATION: BUY
TARGET PRICE: RS.2436 FY13E P/E: 11.4X; P/ABV: 2.3X
Strong NIM is likely to protect earnings, at least in near future; tier-I capital
is likely to improve to ~9% (FY12) due to Rs.79 bn capital infusion along
with ploughing back of profits. Stock has corrected almost 14% from its
recent highs and currently trades at reasonable valuation. Hence, we
upgrade the stock to BUY.
SBI has consistently delivered robust NIM during last couple of quarters.
During Q3FY12, NIM came at 4.05% (domestic NIM: 4.39%), one of the
highest in the industry on back of better asset yield while rise in cost of
funds was moderate. We believe strong NIM provides cushion to its future earnings.
Capital infusion (Rs.79 bn) along with ploughing back of FY12 profits
(post dividend payout) is likely to improve tier-I to ~9% (tier-I was at
7.59% at the end of Q3FY12). This is definitely positive for the stock, as it
was one of the reasons for its recent downgrade, by one of the rating
agency.
The biggest disappointment during Q3FY12 results came on the slippage
front (Rs.81.6 bn; 4.2% on annualized basis) which continued to remain
at elevated levels - run rate at 4%+ during last two quarters, is clearly
negative in our view. However, retail, agri and SME book did better than
previous quarter.
At the CMP of Rs.2224, stock is trading reasonable at 1.4x its FY13E adjusted book value and 7.0x its FY13E earnings, after stripping the value
of its subsidiaries. We have tweaked the earnings estimate for FY12-13E
post capital infusion by the GOI.
Stock has corrected almost 14% from its recent highs and currently
trades at reasonable valuation. Hence, we upgrade the stock to BUY with
the TP of Rs. 2436 (earlier Rs.2391) based on SOTP methodology where
core business is valued at Rs.1578 (1.6x FY13E ABV) and subsidiaries are
valued at Rs.858 (after giving 20% holding company discount).
Robust NIM on back conscious strategy; provides cushion to its
future earnings
SBI has consistently delivered robust NIM during last couple of quarters; NIM came
at 4.05% (domestic NIM: 4.39%) during Q3FY12, one of the highest in the industry.
This has come on back of better asset yield (improvement of 135 bps YoY), while
rise in cost of funds was relatively moderate (74 bps YoY).
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