Dolat Capital calls a ‘Buy’ on Bank Of India
CMP: Rs. 339 Target Rs. 411
Operating profit and bottom-line beat our estimates; better performance was mainly due to higher margin (derived from higher exposure to high yielding advances), higher non-recurring other income items and much lesser operating expenses
Considering sequential improvement in asset quality and margin, we revise our FY13 earnings estimates upward by 18% and introduce FY14 earnings estimates and rollover our target price on FY14’s estimates. We upgrade our stock rating to Accumulate with a revised price target of Rs 411. At current price, it quotes at 1.1x and 1.0x ABV FY13 and FY14 respectively; based on our target price, the stock would trade at 1.2x adjusted book value FY14.
Bank of India’s (BoI) NII grew 8.4% YoY to Rs 25bn—4.6% higher than our estimates of Rs 24bn. BoI’s non-interest income recorded 17.5% YoY growth to Rs 9.7bn (primarily, led by higher cash recoveries) and sharp decline in operating overheads lifted operating profit to Rs 20bn (67% YoY growth) compared to our estimates of Rs 18bn.
Net profit grew by 93% YoY to Rs 9.5bn (Dolat est: Rs 5.6bn, Bloom consensus est: Rs 6.9bn) mainly due to expansion in margin, higher other income and lesser operating overheads. Sequential decline in gross NPAs resulted in lesser than expected provisioning which further aided bottom-line.
Margin rose by 31bps to 2.86% from 2.55% in Q3 FY12; primarily, on account of 35bps sequential rise in yield of funds to 8.34% and cost of funds remaining stagnant at 5.67%. Incrementally, the bank’s exposure to high-yielding advances (gems & jewellery, construction and infrastructure sectors) further increased resulting into higher assets’ yield. Higher NPA recoveries (of Rs 4.8bn compared to Rs 3.6bn in Q4 FY11) also resulted into reversal of interest income.
BoI’s asset quality improved on sequential basis, with a 7.7% QoQ decline in gross NPA to Rs 58.9bn. Net NPA ratio sequentially fall by 31bps to 1.47% while gross NPAs ratio by 40bps to 2.34%. During the quarter, around Rs 22 bn loans were restructured which belongs to SEBs. Going forward, the management expects that its gross NPA ratio would decline to 1.6% and net NPA ratio to 1.1%; and also its gross NPAs at Rs 46bn in FY13.
Valuation: Considering sequential improvement in asset quality and margin, we revise our FY13 earnings estimates upward by 18% and introduce FY14 earnings estimates and rollover our target price on FY14’s estimates. We upgrade our stock rating to Accumulate with a revised price target of Rs 411. At current price, it quotes at 1.1x and 1.0x ABV FY13 and FY14 respectively; based on our target price, the stock would trade at 1.2x adjusted book value FY14.
Sunidhi calls a ‘Buy’ on Hyderabad Industries
CMP: Rs. 368 Target Rs. 510
Q4FY12/FY12 Results: During Q4FY12, sales rose 29.8% to Rs 248.6crore and net profit by 71.4% to Rs 18.0crore. (YoY). OPM and NPM stood at 13.5% and 7.2% compared to 10.9% and 5.5% respectively in Q4FY11. EPS for Q4FY12 stands at Rs 24.0 Vs Rs14 in Q4FY11. During FY12, sales advanced by 18.4% to Rs 857.8 crore and net profit rose by 19.8% to Rs 60.6 crore. OP and NP margin stood at 13.5% and 7.1% against 13.4% and 7.0% respectively in the corresponding period last year. EPS for FY12 stood at Rs 81.1.The DER as at FY12 stood at 0.21:1 (0.29:1) whereas the value of the net block stood at Rs 326.4 crore (Rs 289.9 crore).
Valuation & Recommendation: At the CMP of Rs 381, the share is trading at a P/E of 4.1x on FY12E and 3.5x on FY13E. We recommend BUY with an increased price target of Rs 510 in the medium-to-long term.
Company Description: HIL, a C K Birla Group incorporated in 1946 is into the business of producing building products, engineering goods and industrial products. HIL is the market leader in its segments. HIL markets its product AC and fibre cement sheets under the well-known brand “Charminar”. The total capacity of the cement sheet is 8.55 lakh tpa, prefab building panels at 4.60 lakh tpa, prefabricated autoclaved capacity at 3.05 lakh tpa and thermal insulation capacity is 6,000 tpa. The commercial production of sheeting line 2 in Uttar Pradesh has started w.e.f. 09 February 2012.
HIL is also the largest manufacturer of calcium silicate, insulation blocks, pipe sections and jointing for gasketing, thereby meeting the critical needs of the fertilizer, engineering & chemical industries. It also makes aerocon prefab panels, autoclaved aerated concrete blocks, which find applications in the construction of buildings, malls, shopping complexes and office partitioning etc. HIL’s most modern manufacturing plants are located at 12 locations in 8 states - Andhra Pradesh, Gujarat, Haryana, Jharkhand, Kerala, Maharashtra, Orissa and Uttar Pradesh. HIL has a strong & extensive distribution network with nearly 8000 sales points spread across the country which is serviced by its 45 depots.