Beruflich Dokumente
Kultur Dokumente
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
May-17
Oct-16
Nov-16
Apr-17
Mar-17
should buy shares worth 1.85-1.9 Lac ( below 2 Lac),on or before 23rd May
2017; keeping in mind possible upside till the date of 'Record Date'.
Shares tendered
Calculated Acceptance Expected Market Expected Return to
Scenario as a % to total
Ratio Price post Buy-Back Investors (Tax Adjusted)
retail shareholders
800 7.5%
1 20% 70%
800 5.1%
2 25% 56%
800 2.5%
3 35% 40%
800 0.5%
4 50% 28%
810 7.7%
5 20% 70%
810 5.5%
6 25% 56%
810 3%
7 30% 40%
810 1%
8 50% 28%
820 7.9%
9 20% 70%
820 5.9%
10 25% 56%
820 3.5%
11 30% 40%
820 1.7%
12 50% 28%
After studying Wipro's (Direct Industry Peer) Buy-back Tendering pattern of last years, and on the basis of our
analysis of various other buy backs done in past, We have a positive view on this particular Buy-back.. We
recommend retail shareholders "BUY" the stock around in the range of 840-850/- for tendering in Buy-Back .
As per our fundamental analysis, near term downside risk is capped at 5-6% from current market price..Our analysis
suggest potential return of upto 5.5% safer arbitrage return (after adjusting 30% tax on offline transfer of shares)
in this Buy-back.. The holding period would be approx 40-45 days from now.
BANKS RATING TARGET India at its decades of lowest credit growth, as per data by RBI. How long this
YESBANK BUY 1936 weakness in credit appetite is going to last?
Capital raised creates attractive valuation. Recent Non-performing assets has increased by 5 times in just 5 years. Are stressed assets
weakness -an opportunity
at peak level or how much more are still left to be recognized?
HDFCBANK BUY 1725 Transferring power from bankers to RBI- Will lead to fast resolution of stress assets.
Despite consistent healthy profitability and growth Will this hurt banks autonomy in lending and borrowing?
track record, best is yet to come.
90%
78% 77% 76%
80% 75% 74% 73% 72% 72%
70%
60%
50%
40%
25% 26% 27% 28% 28%
30% 22% 23% 24%
20%
10%
0%
Rs in Crore
Date 25-Mar-11 30-Mar-12 31-May-13 28-Mar-14 3-Apr-15 1-Apr-16 31-Mar-17
Food Credit 64,282 79,788 118,042 97,552 69,227 101,205 53,927
Non Food Credit 3,877,801 4,627,145 5,250,736 6,041,493 6,733,294 7,399,292 7,827,601
Bank Credit 3,942,083 4,706,933 5,368,778 6,139,045 6,802,521 7,500,497 7,881,528
Source: RBI Fortnightly bank credit
2.5%
2.0% 1.8%
1.3%
Bulky of stress 1.5%
1.2%
1.0%
assets has been 1.0% 0.7%
0.8%
Government has also taken certain steps within steel sector to improve its efficiency like
intervention in terms of minimum import price and anti-dumping duty on imports, National steel
policy that favors Indian Steelmakers. We think this type of initiative will be more favorable for
economy and needs more sector specific decision to combat stress assets.
However in the latest development, Government has passed an ordinance which will empower
RBI to issue borrower specific direction to banks for tackling NPA problem. Now RBI can issue
instructions to banks to initiate the resolution under the Insolvency and Bankruptcy Code 2016.
We see this ordinance as welcome step to fasten the resolutions of stress assets as earlier to
Empowering RBI is this, slow decision-making process under PSU banks were hindering the resolution of large
welcome step for stress assets. But the basic question remains the same that how this new ordinance will help to
fast decision making get banks money back from stressed corporate borrower? How and when oversight committee
process but will be formed by RBI? Is there chance of conflict of interest between RBI and management of
uncertainty rises. bank? How much the haircuts would be taken? Answer to these questions is uncertain as of
now and will take much time for clearance and we analyze that if resolution is delayed than
ageing related NPA will badly hit the PAT in FY18 for big corporate lenders. Also one basic
problem for PSU bank will even persist in terms of low capitalization and any delay or huge
haircuts under resolution process will again impact the capitalization.
We maintain our positive stance on private banks as they will continue to acquire market share
from public banks thus loan growth will remain healthy going forward. This value migration from
PSU to Private has more legs to go. Continuation of investment in digitization has resulted in
controlled and declining operating expenses hence cost to income ratio is improving. Private
Banks have comparatively much less stress assets against public banks. Healthy capitalization
ratio also helps to increase the business going forward. However for many banks valuation has
run ahead of their fundamentals. But decline in prices will give an opportunity. Our top picks are
HDFC Bank, Federal Bank, Yes Bank and Axis Bank. Apart from this under public sector banks
Indian bank and Vijaya bank were our top picks based on retail business focus, adequate
capital, relatively low stress assets and higher recovery than slippages. This tactical stance of
ours helped us ride the PSU banking rallies over last nine months. First we recommended Indian
Bank at Rs 100 and got neutral near Rs 330 and recommended Vijaya Bank at Rs 48 and now
we have changed our rating to neutral for Vijaya Bank at Rs 98. Both Indian Bank and Vijaya
Bank are trading at P/B of 1.0 and do not leave much on table in context of current fundamental.
At this point, we recommend Buy only on SBI among PSU Banks as it has relatively better
quality of book and capital ratio than its peers. Merger will be key monitorable for the bank.
70.0%
60.2%
60.0%
46.0% 47.7%
50.0% 42.6%
40.0% 46.8%
41.6%
30.0%
32.3% 31.2%
Financials/Valu CY15 CY16 CY17E CY18E FY19E
20.0%
ation
Net Sales 8,175 9,224 10,847 12,038 13,351
10.0%
0.0%
EBITDA 1,555 1,807 1,969 1,976 2,236
CY13 CY14 CY15 CY16 EBIT esv 1,535 1,772 1,954 2,131
Shareholding patterns % PAT 1,208 1,453 1,613 1,621 1,883
1QCY17 4QCY16 3QCY16 EPS (Rs) 58 96 121 124 145
Promoters 62.8 62.8 62.8 EPS growth (%) -52% 63% 27% 2% 16%
Public 37.2 37.2 37.2 ROE (%) 32% 31% 34% 32% 34%
Total 100.0 100.0 100.0 ROCE (%) 43% 48% 47% 43% 45%
BV 292 313 344 377 415
Stock Performance % P/B (X) 16.9 19.8 21.0 19.8 18.1
1Mn 3Mn 1Yr P/E (x) 99.3 68.6 56.3 54.9 47.2
Absolute 2.6 6.5 15.9
Rel.to Nifty (0.6) (0.9) (3.7) Recent development and launches:
130
Nestle India has launched new range of Noodles Maggi Masala in India.
NESTLEIND NIFTY The new range of MAGGI noodles includes four new flavors - Amritsari
125 Achari, Mumbaiya Chatak, Super Chennai and Bengali Jhaal.
120
115 In this quarter, Nestle India tied up with Google and Paytm for promotion to
create strong bonding with consumers which may boost volumes going
110
105 forward.
100
95 The Company has introduced Milo Ready to drink the sports partner for
90 kids in 1QCY17.
85
NESTLE India extends NESTLE a+ GREKYO range with the launches of
80
Blueberry Greek Yoghurt and Greek Style Curd.
RAJEEV ANAND
rajeev.anand@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
Quarterly Performance
Financials 1QCY16 2QCY16 3QCY16 4QCY16 1QCY17 1QCY16 QoQ% CY15 CY16 YoY %
Net Sales 2,368 2,272 2,363 2,286 2,592 9% 13% 8,175 9,224 13%
Other Income 35 37 37 41 42 18% 3% 110 149 36%
COGS 987 950 986 959 1,094 11% 14% 3,469 3,880 12%
Net Provi. For Contin. 12 22 10 9 10 -17% 7%
Employee Cost 213 263 270 294 246 16% -16% 913 1,073 18%
Other Expenses 560 608 650 617 625 12% 1% 2,147 2,410 12%
EBITDA 513 429 447 403 517 1% 28% 1,555 1,807 16%
Depreciation 89 89 88 87 87 -3% -1% 347 354 2%
Interest (26) 0 0 0 (23) -12% -5158% 3 4 34%
PBT 433 377 397 276 450 4% 63% 814 1,440 77%
Tax 166 114 127 113 143 -14% 27% 250 519 107%
PAT 287 231 269 164 307 7% 87% 563 921 63%
Sales grew by
9.5% YoY
second best in Better revenue growth led by better domestic business performance
our FMCG
universe after The company has reported sales Rs 2592 cr(Vs Rs 2561 cr of our expectation), grew by 9.5% YoY,
GODREJCP. second best in our FMCG universe after GODREJCP.
Gross margin declined by 51 bps YoY to 57.8% led by higher input prices(Milk derivatives).
Domestic revenue grew by 9.7% led by volume improvement across section. Exports remained flat
due to lower sales from Nepal and Bhutan.
EBITDA margin declined by 169 bps YoY to 20% from 21.7% led by higher COGS (up 51
bps),employee cost(up by 52 bps) and Other expenses(up by 47 bps).
PAT margin declined by 30 bps YoY 11.8% YoY from 12.1%.
PAT for this quarter grew by 7% YoY to Rs 307 cr from Rs 287 cr. PAT margin deteriorated by 30
bps YoY to 11.8% from 12.1% in Q1CY17.
OPM NPM
Sales(in cr) PAT(in cr)
25.0% 21.8% 21.7%
3000 350 20.0%
309 307300 19.2% 18.9% 18.9%
287 20.0% 18.0% 17.6%
2500 269
250 15.3%
231
2000 200 15.0% 12.3% 12.1% 11.8%
183 11.4%
164 150 10.2%
1500 124 9.3%
100 10.0% 7.1% 7.2%
1000 50
0 5.0%
500
2516
1957
1742
1959
2368
2272
2363
2286
2592
-64
-50
0 -100 0.0% -3.3%
-5.0%
Historically NESTLE has strong pricing power: As in most the FMCG categories input prices
have bottomed out and have started moving up. Hence going forward we expect growth for
FMCG will be pricing led. NESTLE has strong premium product portfolio and strong pricing
power.
Urban demand recovery led growth going forward: For last four years urban demand is
struggling due to higher inflation and lower economic activities which is one of the causes of
companys dismal performance. As NESTLEs most of the sales comes from urban areas,
approx. 75%, hence any recovery in urban demand will be huge positive for the company. We
expect better demand scenario for urban market going ahead led by declining inflation and
interest rate scenario. Hence we have positive view on NESTLE.
Smart bounce back by Maggie shows strong brand value: Nestle re-launched Maggie on 9
Nov., 2015 and within 53 days of re-launch, it regained market share of 33% which shows strong
brand power. Presently, Maggies market share has reached to 60% versus peak market share
of 75% which is commendable. It shows new managements aggression and focus towards
NESTLEs future growth. Going forward we expect brand Maggie to consolidate further with
more market share gain.
NESTLE didnt take price hike in CY16, so expect hike in CY17 Prepared Dishes(includes Maggie) Volume and growth
Overall Realization growth YoY Prepared Dishes Vol.(in MT) Vol. Growth YoY
73%
35% 31% 300000 80%
30% 60%
250000
25% 30%
25% 22% 40%
20% 200000 13%
8% 4% 4% 20%
13%
15% 11%
8%
7%
9% 150000 0%
10% 5%
-20%
5% 2% 100000
-59% -40%
122208
158993
193494
219041
236554
245443
254553
103138
178467
0%
50000
-5% -60%
-11%
-10% 0 -80%
-15%
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
May-17
Oct-16
Nov-16
Apr-17
Mar-17
India Formulations- Sales for the formulation business in India for Q4FY17 was at Rs. 576 Cr.
(Growth of 6.88% YoY). India business is improved in Cardiac, Respiratory, Anti-diabetic and Derma
segment.
USA Formulations- Sale of finished dosage formulations was Rs. 1000 Cr. for the Q4FY17. (Growth
of 53.45% YoY), but reported a decline in growth of 18% QoQ on account of US pricing pressure and
increased competition. Sales from the newly launched drug Zetia is also impacted due to price
erosion.
Africa, Asia and CIS Region (ROW)- In Q4FY17, revenue from Africa, Asia and CIS region was Rs.
288 Cr. as against Rs. 298 Cr.(de-growth of 3.06% YoY) due to Russian subsidiary recorded
moderate sales growth.
Europe Formulations- Glenmark Europes operations revenue for Q4FY17 was at Rs.229 Cr. as
compared to Rs. 270 Cr. YoY recording a decrease of 15.06% YoY. The growth was impacted due to
the currency depreciation of the British Pound.
Latin America- Revenue from its Latin American and Caribbean operations was at Rs. 133 Cr. for
the Q4FY17 as compared to Rs. 241 Cr. in the corresponding quarter of FY16(Decrease of 44%
YoY).The Latam region performance continues to be impacted on account of the lower sales from
Venezuela in the fourth quarter of the FY17.
Active Pharmaceutical Ingredients (API)- Revenue from sale of API was Rs. 199 Cr. during the last
quarter, Glenmark filed 3 US DMF, one Canada and one in Europe and has also received an EIR
from the U.S. FDA for its Ankleshwar facility.
Other Income- Company has reported other income of Rs. -51 Cr. in Q4FY17 as compared to Rs. 12
Cr. in the same quarter of FY16. This loss is on account of higher forex losses.
Finance Cost- Glenmark has reported finance cost of Rs. 70 Cr. in the last quarter of FY17 as
compared to the Rs.47 Cr. in the same quarter of FY16. Finance cost has increased on account of
higher debt level. Debt level has increased to Rs. 4724 Cr. in FY17 vs Rs. 3275 Cr in FY16.
Tax- Company has received tax benefit of Rs. 11 Cr. in Q4FY17 which is one-time benefit.
Management has guided that from Q1FY18, company will be in normal tax braket and effective tax
rate would be around 25%.
PAT- Glenmark has reported PAT of Rs. 184 Cr. in the last quarter of FY17 registering growth of 23%
YoY and de-growth of 61% QoQ . This decline is on account of lower earnings and margins in the last
quarter of FY17.
Gross Margin improved by 100bps YoY but contracted by 799bps QoQ on account of higher purchases
of stock in trade.
EBITDA improved by 500bps YoY but degrew by 1200bps due to foreign currency loss of Rs. 65 Cr in
Q4FY17 and higher R&D expenses.
PAT grew by 23.5%YoY to Rs.184 crore on account of higher revenue which resulted in 100bps
improvement in PAT Margin in 4QFY17.
400 15% 7%
477
7% 8%
300 200
10% 6%
449
444
404
379
371
359
227
200
224
216
4%
335
196
302
184
183
281
100
165
266
149
5%
115
100 1% 2%
11
0 0% 0 0%
Concall Highlights:
Price erosion in US base business has reached to 15% in Q4, including Zetia(which has exclusive rights
for 180 days). Management is expecting price erosion to continue for next 10-18 months
Company has received 4 observations for Goa facility for which remediation process is completed and
company has responded to USFDA.
Management is expecting 10-15 launches in FY18,and plans to file 3 ANDAs in Q1FY18.
Revenue guidance of 12-15% in FY18E. And margin guidance of 23% going forward.
Management expects Zetia sales to revamp in Q1FY18, and looks for few meaningful launches in
FY18E.
Generic anti-cholesterol drug Zetia sales to be lower than company's guidance of USD 200 million.
Generic Zetia to be key contributor in Q1 FY18, as two months exclusivity remain.
R&D expenditure to be in the range 11-12 percent in FY18
Glenmark took a write-off Rs 325 crore of its Venezuela business in Q4FY17.
Management expects Goa facility to be inspected in 2017.
Increased competition in US market due to entry of new players.
Targeting to file 20 25 ANDAs and launch ~20 products annually. Leverage expertise in the dermatology
segment 15+ ANDAs pending for approval and 20+ products in development
Management expects EBITDA margins to touch 25 percent over the next 10 years.
Higher Research & Development- The company has a pipeline of 7 new molecular entities, which
includes 2 new chemical entities and 5 new biological entities, in various stages of clinical development.
This involves higher R&D expense of 12% going forward and we expect this will impact margin in
FY18E.
Debt repayment- In the last quarter management has guided to repay debt on the back of Zetia sales,
but it was unable to repay its debt in FY17. Now debt repayment is the key concern to track for the
company in this current fiscal. Debt/Equity ratio is 1.05 in FY17 and we expect to come down in FY18
based on the management guidance to repay debt.
FY16 FY17
9% 9%
8%
9%
6%
10%
28% 25%
35% 34% Rs.3800 to Rs.3575 and change our rating from BUY to NEUTRAL.
34%
33% 32%
32% 31%
31%
30%
Financials/Valu FY15 FY16 FY17 FY18E FY19E
29% ation
Net Sales 27,538 28,457 28,585 30,971 33,473
28%
EBITDA 3,497 4,398 4,576 5,206 5,926
EBIT 2,956 3,954 4,074 4,618 5,279
Shareholding patterns % PAT 2,365 3,112 3,546 3,793 4,309
4QFY17 3QFY17 2QFY17 EPS (Rs) 118 156 178 190 216
Promoters 34.6 34.6 34.6 EPS growth (%) 12% 32% 14% 7% 14%
Public 65.4 65.4 65.4 ROE (%) 36% 35% 34% 32% 31%
Total 100.0 100.0 100.0 ROCE (%) 45% 44% 39% 38% 38%
BV 328 442 517 599 692
Stock Performance % P/B (X) 8 7 6 6 5
1Mn 3Mn 1Yr P/E (x) 22 19 19 17 15
Absolute 8.2 7.4 16.9
Rel.to Nifty 6.2 0.3 (2.5) RECENT DEVELOPMENTS:
130
The Halol Plant at Gujarat has started commercial production in 4QFY17.
HEROMOTOCO NIFTY The first phase capacity of Halol plant is 12 lakh units per annum, while
125
120
overall production capacity planned is 18 lakh units. This plant will take care
115
exports also.
110
The company has planned Rs. 2500 crores of capital expenditure to be
105
spent over next two years. This will be towards new product development,
100
phase wise capacity installation & expansion at existing facilities.
95
90 The company expanded its footprint in the international markets by
85 commencing operations in two significant global markets like Argentina and
80 Nigeria.
Jul-16
Sep-16
Feb-17
Jan-17
Dec-16
Jun-16
Aug-16
May-16
May-17
Oct-16
Nov-16
Apr-17
Mar-17
The company has robust pipe line of new products in Scooter and Premium
segment motorcycles. These products will be launched in FY18 & FY19.
NAVEEN KUMAR DUBEY
Naveen.dubey@narnolia.com
Please refer to the Disclaimers at the end of this Report
Narnolia Securities Ltd
Quarterly Performance
Financials 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY % QoQ% FY16 FY17 YoY %
Total Volumes ('000) 1,721 1,745 1,823 1,473 1,622 -6% 10% 6,631 6,664 0%
Realization(Rs./ bike) 43,644 42,391 42,755 43,202 42,639 -2% -1% 42,912 42,895 0%
Net Sales 7,505 7,399 7,796 6,365 6,915 -8% 9% 28,457 28,585 0%
Other Income 117 120 152 132 118 1% -10% 413 522 26%
COGS 4,964 4,965 5,183 4,128 4,736 -5% 15% 19,308 19,091 -1%
Employee Cost 351 336 357 374 328 -7% -12% 1,339 1,432 7%
Other Expenses 1,001 867 887 783 893 -11% 14% 3,412 3,486 2%
EBITDA 1,189 1,230 1,369 1,080 958 -19% -11% 4,398 4,576 4%
Depreciation 115 115 119 125 135 18% 8% 443 502 13%
Interest 1 2 2 2 1 21% -3% 15 27 87%
PBT 1,190 1,234 1,400 1,085 939 -21% -13% 4,353 4,568 5%
Tax 357 351 396 313 221 -38% -29% 1,275 1,339 5%
PAT 833 883 1,004 772 718 -14% -7% 3,112 3,546 14%
Hero Motocorp reported 8%YoY decline in the net sales in 4QFY17. Total sales volumes contracted
by 6%YoY and Realization also declined by 2%YoY.
Reduction in the total sales volumes was the after effect of demonetization during the 3QFY17. 2
Wheeler sector was one of the most affected sectors due to currency ban. The company witnessed
slow recovery during January and February months in the rural segment, where Hero has more than
50% exposure. 2 Wheeler sales increased in March on account of destocking of BS-III inventory.
Heavy discounts of up to Rs.10000 per vehicle because of higher BS-III inventory resulted in lower
realization for the quarter.
EBITDA declined by 19% YoY to Rs.958 crore in 4QFY17 due to increased commodity prices and
higher other expenses.
Depreciation for the quarter stood at Rs.135 crore, higher 18%YoY because of the production at Halol
Plant has started in 4QFY17.
Profit after tax also declined by 14% YoY to Rs.718 crore during the quarter.
-6% -2%
1,574,861
1,690,354
1,721,240
1,745,389
1,823,498
1,645,867
1,621,805
-7% 0%
600,000 -5%
43,414
43,155
43,644
42,391
43,202
42,639
42,259
42,755
Gross Margin contracted by 230 bps YoY to 32% due to higher commodity prices. Transition from BS-III
to BS-IV has also put the margins under pressure. Full impact of increased commodity prices have not
yet factored in 4QFY17 results and thus margins will also be under pressure in 1QFY18.
EBITDA Margin declined by 200 bps YoY to 13.8% in 4QFY17 impacted by higher other expenses.
Lower tax expenses during the quarter supported PAT and restricted the further decline in the PAT
Margins.
EBITDA and EBITDA Margin trend PAT and PAT Margin trend
EBITDA (Rs. Crore) EBITDA Margin PAT (Rs. Crore) PAT Margin
1,004
4%
1,048
1,083
1,131
1,189
1,080
1,230
1,369
200
750
772
793
833
883
772
718
2%
958
200 2%
- 0% - 0%
Concall Highlights:
High single digit growth for industry in FY18.
Double digit growth for Hero in FY18.
EBITDA Margin would be in the range of 14-15%.
There will be cost pressure in 1QFY18 also.
Advertising & Promotion expenses will be 2.5% of sales in FY18.
Depreciation will be high because of commencement of production in Halol Plant.
Scooter segment growth will be higher than industry.
Rural market is expected to post good growth backed by good monsoon and marriage season.
Capex guidance of Rs.2500 crore to be spent on R&D (new product development) and Andhra plant.
Inventory level stood at 5-6 weeks.
The tax benefit for plants in Rajasthan and Gujarat will last for 7 years; and the benefit is restricted to the
extent of investment
Management expects benefit from LEAP program to be around 50-60 bps and additional 25-30 bps from
other initiatives.
Export market outlook remain sluggisg for next couple of months.
The management is also focusing on developing electric vehicles considering the government focus
towards Mission Electric by 2020.
Higher Depreciation may affect the bottom-line- The commercial production at Halol plant has started in
4QFY17. Considering the demand scenario we expect that it will take at least 6-8 months to ramp up and till
then the company has to incur higher other expenses and depreciation on the plant.
Uncertainty regarding tax regime- GST will come in effect from 1st July 2017 and the tax rates are still not
certain which keeps the auto industry to on its toes. All the auto manufacturers will refrain from keeping higher
inventory with them. The meeting has been scheduled on 19th May to decide the tax rates.
Rural Demand to drive growth- Hero Motocorp has more than 55% exposure in rural segment. Expectation
of good monsoon in the current fiscal may drive the demand going ahead. Marriage season in the North
region will be key growth driver for the company in FY18.
New product launch in the scooter and premium segment- The company has huge capex plan of Rs.2500
crore over next two years. The launches will be in the fast growing scooter segment and premium segment
motorcycles. Hero Motorcorp has very minimal presence in the premium segment where peers like Bajaj Auto,
TVS Motors and Yamaha has captured more than 80% market share.
Trend in Segment Mix Share of Scooters & 125 cc segment increasing gardually
Vijaya bank is trading at its higher Financials/Valuation FY15 FY16 FY17 FY18E FY19E
range of P/B NII 2,292 2,761 3,506 4,054 4,701
1.20
PPP 1,912 2,086 2,737 2,784 3,127
1.00
PAT 439 382 750 904 1,338
0.80 NIM % 1.8 2.1 2.5 2.7 2.8
0.60 EPS (Rs) 5.1 4.1 7.5 8.2 12.2
0.40 EPS growth (%) 26.4% -20.0% 83.5% 9.5% 48.0%
0.20
ROE (%) 7.5 6.1 11.1 11.7 15.0
ROA (%) 0.3 0.3 0.5 0.6 0.8
-
BV 69 70 70 77 86
4QFY16
1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
1QFY17
2QFY17
3QFY17
4QFY17
FY09
FY07
FY08
FY10
FY11
FY12
FY13
Profitability Metrix 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 YoY(+/-) QoQ(+/-) FY16 FY17 YoY %
C/I Ratio % 66.6 54.9 53.1 53.6 51.2 -15.44 -2.44 57.4 53.1 -4.33
Cost to Income Empl. Cost/ Tot. Exp. % 58.5 61.0 63.8 64.4 65.6 7.02 1.20 59.8 63.9 4.09
remained at Other Exp/Tot. Exp.% 41.5 39.0 36.2 35.6 34.4 -7.02 -1.20 40.2 36.1 -4.09
higher side. A Provision/PPP % 207.8 58.4 68.3 60.6 61.5 -146.4 0.89 89.8 62.2 -27.55
lot of scope Tax Rate % 121.2 15.3 14.6 15.2 24.7 -96.46 9.56 -141.1 17.9 159.03
form Int Exp./Int Inc. (%) 77.4 74.4 73.5 71.1 67.6 -9.78 -3.50 77.2 71.7 -5.48
improvement.
Other Inc./Net Inc. % 29.0 23.1 31.9 38.9 31.3 2.28 -7.64 24.0 32.0 7.97
PAT/ Net Income % 7.6 15.9 12.7 15.5 14.2 6.54 -1.35 10.5 14.6 4.05
PAT Growth % -27.3 13.4 34.1 337.7 183.9 211.2 -153.8 -13.1 96.6 109.67
NII Growth % (YoY) 6.9 18.2 19.5 22.9 48.0 41.16 25.17 20.4 27.0 6.57
Operating Profit Growth 0.0 16.8 43.1 55.5 123.7 123.73 68.24 23.0 56.3 33.30
YoY
RoE %
% 6.1 9.8 9.1 13.2 11.6 5.47 -1.60 6.1 11.1 4.97
RoA % 0.3 0.5 0.4 0.6 0.5 0.23 -0.08 0.3 0.5 0.25
Concall Highlights :
Slippages were due to demonetization which got deferment during 3Q FY17 on account of dispensation
scheme of RBI. However management said that they saw good recovery in MSME accounts from mid of
April. There was only one large account from S4A which slipped to the tune of Rs 60 to 70 Cr.
Steel and Iron advances is Rs3711 Cr and NPA in this Rs 2000 Cr which constitute 31% of total GNPA.
Engineering constitute 8.3% of GNPA, Power is 9.65%, textile is 4.8%, Road is 5.7% of total GNPA.
Expect 9%-10% credit growth on the back of retail, agri and MSME sector in FY18.NIM target is 2.8%-
3%. Expect to cross PCR of 65% in FY18.
Management expects slippages run rate of Rs 250-300 Cr per quarter in FY18.
S4A exposure is Rs 836 Cr, SDR is Rs 222 Cr (4 a/c) of which Rs 192 is NPA, 5/25 is Rs 1972 Cr of
which Rs 982 Cr is already NPA.
One account to the tune of Rs 400 Cr from electronic company is showing stress.
Restructured book reduced due to conversion of discom exposure of Rs 400 Cr from Tamil Nadu and
Telengana.
View and Valuation
Focus of management on retail banking has helped the operating profitability to improve significantly.
The balance sheet has tilted towards more on retail banking both on assets side as well as liability side.
Focus on CASA deposits and shedding the bulk deposits has helped the cost of fund to decline
significantly. We expect NIM to improve further in FY18 to 2.75%. Focus of management is growing retail
book going forward hence we expect 8 to 10 percent credit growth in FY18. Assets quality is likely to
continue to improve going forward but we are cautious for the whole scenario of assets quality in PSU
banking. With the Tier 1 ratio at 9.96% and CRAR at 12.73% management plans to Raise Rs 1000 Cr
core capital in FY18. With this we expect RoE and RoA of 11.7% and 0.6% respectively in FY18.
We initiated this stock at the price of Rs 48 which has almost doubled till now. The stock is
currently trading at (1.3x/1.2x PV FY17/FY18E) and valuation has got stretched which leaves us
with little upside, hence we recommend to partly book profit on this stock and hold for the rest
with the target price of Rs 98.
Advances Performance
4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17
Gross Adv. (Rs in Cr) 87,692 84,800 87,026 89,696 90,765 90,199 91,821 90,290 96,821
Adv. Growth YoY % 6.4 10.0 10.8 13.3 3.5 6.4 5.5 0.7 6.7
>> Growth QoQ % 10.8 -3.3 2.6 3.1 1.2 -0.6 1.8 -1.7 7.2
Deposits Performance
4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17
Deposits (Rs in Cr) 126343 127640 123286 125475 125441 120477 127785 128299 133012
Growth YoY % 1.6 7.6 0.1 1.1 -0.7 -5.6 3.6 2.3 6.0
>> Growth QoQ % 1.8 1.0 -3.4 1.8 0.0 -4.0 6.1 0.4 3.7
CASA (Rs) 25,721 24,285 25,311 25,992 29,125 27,975 28,953 36,816 37,373
>>CASA Growth YoY % 12.5 6.9 8.4 9.8 13.2 15.2 14.4 41.6 28.3
>> Growth QoQ % 8.7 -5.6 4.2 2.7 12.1 -3.9 3.5 27.2 1.5
CASA % 20.4 19.0 20.5 20.7 23.2 23.2 22.7 28.7 28.1
CA % 5.3 4.2 4.6 4.9 5.3 5.0 4.6 6.3 6.4
SA % 15.1 14.8 15.9 15.9 17.9 18.2 18.0 22.4 21.7
Credit Deposit Ratio 69.4 66.4 70.6 71.5 72.4 74.9 71.9 70.4 72.8
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