Friday, April 29, 2011

Oriental Bank of Commerce - 4QFY2011 Results Flash

Oriental Bank of Commerce - 4QFY2011 Results Flash

For 4QFY2011, Oriental Bank of Commerce (OBC) delivered muted performance with net profit declining by 18.3% sequentially and growth of just 5.2% on a yoy basis to Rs334cr. The results were below our estimates of Rs359cr, in spite of Rs51cr write back towards tax liability for the quarter, due to higher-than-estimated provisioning expenses.

Key highlights:

·         Business growth momentum was healthy with advances and deposits growth of 5.6% qoq and 7.5% qoq, respectively. On a yoy basis, advances and deposits grew at slower pace of  13.9% and 15.6%, respectively.

·         Net Interest Income was flat both sequentially as well as on a year on year basis in spite of moderate business growth. Calculated NIM declined by ~20bp due to the rising cost of funds in the system as a whole and the bank's relatively weak liability profile. Non-interest income growth was strong sequentially, registering a growth of 29.6% qoq, while on a year on year basis it grew by 13.0%.

·         Operating expenses were kept in control. Operating expenses de-grew by 1.6% yoy on the back of 15.4% decline in employee expenses. Other operating expenses rose by 8.6% qoq and 19.0% yoy to Rs228cr. During FY2011, the bank fully recognized the provision for enhancement in gratuity limits of Rs138cr in spite of an option to amortize the same over a five year period. It also took a hit of Rs171cr towards 1/5th of the additional liability for serving employees under the second pension option and Rs151cr towards liability for retired employees. Balance liability carried forward for Pension stands at Rs684cr. As a result of decline in operating expenses compared to growth in operating income the cost-to-income ratio of the bank improved to 35.8% from 38.6% in 3QFY2011 and 38.1% in 4QFY2010.

·         The asset quality of the bank deteriorated during 4QFY2011 with the absolute Gross NPAs increasing by 8.9% qoq and Net NPAs rising by 15.0% qoq. Gross and Net NPA ratios also deteriorated to 2.0% and 1.0%, respectively. The provision coverage ratio stood at 76.8% (77.4% in 3QFY2011) including technical write-offs. Provisioning expenses were substantially higher, rising by 192.3% qoq and 34.3% yoy to Rs560cr (at ~1.4% of average assets vs ~0.6% of average assets during 9MFY2011)

·         The bank's CAR improved to 14.2% from 12.4% in 3QFY2011 on the back of capital infusion by the government.

At the CMP, the stock is trading at 0.8x FY2013E ABV. We maintain our Buy recommendation on the stock, as we believe that the negatives are largely factored into the current valuations (of 0.76x as compared to last five year median of 0.94x). We may revise our estimates post interaction with the management.

 

Exhibit 1: 4QFY2011 Actual vs. Estimates

(Rs cr)

Actual

Estimates

Var (%)

Net interest income

1,013

1,034

(2.0)

Non-interest income

300

256

17.0

Operating income

1,313

1,291

1.8

Operating expenses

470

495

(5.0)

Pre-prov. profit

843

796

5.9

Provisions & contingencies

560

236

137.5

PBT

282

560

(49.5)

Prov. for taxes

(51)

200

NA

PAT

334

359

(7.1)

  Source: Company, Angel Research

 

 

Exhibit 2: 4QFY2011 Performance summary

 

(Rs cr)

4QFY2011

3QFY2011

% chg (qoq)

4QFY2010

% chg  (yoy)

Interest earned

3,232

3,033

6.6

2,685

20.4

Interest expenses

2,219

2,003

10.8

1,696

30.8

Net interest income

1,013

1,030

(1.6)

989

2.4

Non-interest income

300

231

29.6

265

13.0

Operating income

1,313

1,261

4.1

1,255

4.7

Operating expenses

470

487

(3.5)

478

(1.6)

Pre-prov. profit

843

774

8.9

777

8.5

Provisions & contingencies

560

192

192.3

417

34.3

PBT

282

582

(51.5)

359

(21.4)

Prov. for taxes

(51)

174

NA

42



Wednesday, April 27, 2011

Result Flash - Wipro - 4QFY2011

Result Flash on Wipro for 4QFY2011.

 

Wipro reported its 4QFY2011 numbers which were slightly better than our expectations on revenue front but stood muted on operational front. The company reported IT services revenues at US $1,400mn (vs. our expectation of US $1,394mn), up 4.2% qoq. The volume growth for IT services was muted at 1.9% as onsite volume declined by 0.4% qoq while offshore volumes increased by 2.8% qoq. The company managed to garner better price points onsite and offshore with 1.8% and 1.2% qoq growth, respectively. In constant currency terms, revenues came in at US$1,391mn. In rupee terms the IT services revenue came in at `6,289cr (vs. our expectation of 6,258cr), a growth of 5.7% qoq. The overall consolidated revenues grew modestly by 6.0% qoq at `8,302cr (vs. our expectation of `8,190cr). The overall revenues were aided by 19.1% yoy growth in revenues of consumer care and lightening segment along with growth in IT services segment.

 

The overall EBIT margins declined by 52bp qoq to 17.8% (vs. our expectation of 19.3%) on the back of decline in EBIT margin in all the three business segments. The EBIT margin of IT services, IT products and Consumer care and lightening segment declined by  14bp, 100bp and 30bp qoq to 22.1%, 3.6% and 12.0%, respectively. In addition to this the company booked additional cost of `44.7cr in reconciling items as against `7.5cr in 3QFY2011. PAT came in at `1,375cr qoq, up 4.3% qoq.

 

4QFY2011: Result highlights (IFRS, consolidated):

 

 

(Rs cr)

4QFY11

4QFY11E

% Var

3QFY11

% chg (qoq)

4QFY10

% chg (yoy)

Net revenue

     8,302

     8,190

         1.4

     7,829

             6.0

     6,983

          18.9

EBIT

     1,479

     1,583

        (6.6)

     1,435

             3.0

     1,336

          10.6

EBIT margin (%)

       17.8

       19.3

 (152)bp

       18.3

 (52)bp

       19.1

 (133)bp

PAT

     1,375

     1,433

        (4.0)

     1,319

             4.3

     1,209

          13.8

 

Key highlights:

 

·         The net additions were decent at 2,894 employees taking the total employee base to 1,22,385.

 

·         The utilizations for Global IT inched up by 30bp qoq to 68.9%

 

·         Voluntary attritions (annualised) declined to 20.9% from 21.7% in 3QFY2011.

 

·         In constant currency terms, verticals like energy & utilities, retail & transportation, manufacturing, healthcare & services, technology and financial services grew by 7.4%, 4.9%, 3.9%, 2.7%, 1.9% and 1.4% qoq, respectively. The positive surprise came in from telecom vertical, which stood sluggish for all the tier-I IT companies, grew by whopping 9.0% qoq in constant currency terms for Wipro.

 

·         The IT products segment posted 2.3% yoy growth in revenues to `910.5cr, with EBIT margin at 3.6%, down 100bp qoq. 

 

·         Consumer care and lightening segment registered a strong growth of 19.1% yoy with revenues at `724.4crcr. EBIT margin of this segment stood at 12.0%, down 30bp qoq.

 

·         Client addition stood at robust at 68 (vs. 36 in 3QFY2011). Active client base of the company stood at 904 as against 880 in 3QFY2011.

 

·         The guidance for IT services for 1QFY2012 stands highly muted at US$1.394-1.422bn with merely 0.4-1.6% qoq growth.

 

The results were mixed bag and the guidance also looks muted considering the upbeat environment for IT spending. We wait for management's commentary on the outlook relating to client budgets and the internal restructuring going on. The stock is currently under review and we will be releasing a detailed result update shortly.

Tuesday, April 26, 2011

Reliance Industries - RU4QFY2011 - Buy

Result Update on Reliance Industries for 4QFY2011 with a Buy recommendation and a Target Price of `1189 (12 months).

 

For 4QFY2011, RIL reported 14.1% yoy growth in its bottom line due to higher refining and petrochemical margins. On a qoq basis, PAT growth was restricted to 4.7% because of the dip in production from KG-D6 field. Overall, numbers were below our expectations on the top-line and bottom-line fronts on account of lower-than-expected refining margins (due to the impact of FCCU shutdown) and output from KG-D6 field. We maintain Buy on the stock.

 

Earnings post sequential as well as yoy growth: RIL's top line increased by 26.2% yoy to `72,674cr (`57,570cr), primarily on the back of 22.3% yoy growth in refining revenue to `62,704cr (`51,250cr) and a 17.8% yoy increase in petrochemical revenue to `18,194cr (`15,448cr). Growth in the refining and petrochemical segments was due to higher product prices. Crude oil processed during the quarter was flat at 16.7mn tonnes. KG-D6 gas production declined sequentially, with average production at 51mmscmd (54.5mmscmd). Operating profit grew by 7.7% yoy to `9,843cr (`9,136cr), which was below our estimate due to lower-than-expected refining margins.

 

Outlook and valuation: RIL's extant businesses (refining and petrochemical) have been doing quite well and we expect the company to report higher refining margins in the coming quarters as FCCU of DTA Refinery has started. On the petrochemical side, we do not expect margins to fall below the current level. However, there are some concerns on the KG basin gas output. Nevertheless, we believe RIL's deal with BP deal is a positive one, as the combined expertise of both the parties will result in optimisation of producing blocks and enhancement of resources in exploratory blocks. Thus, timely ramp-up in producing fields would improve investor confidence and lead to factor other prospective basins as well. We maintain our Buy rating on RIL with an SOTP-based target price of `1,189.

Monday, April 25, 2011

Sadbhav Engineering - RU4QFY2011 - Accumulate

Result Update on Sadbhav Engineering for 4QFY2011 with an Accumulate recommendation and a Target Price of `161

 

 

For 4QFY2011, Sadbhav Engineering (SEL) posted numbers much higher than our and street expectations both on the top-line and bottom-line fronts. We are revising our estimates for FY2012 and FY2013, given the higher-than-expected top-line performance and pressure on EBITDA margins. We believe SEL has posted consistent growth over the last few quarters and is appropriately rewarded on the bourses with great outperformance over its peers. Hence, we are recommending an Accumulate view on the stock, given the recent sharp run up in the stock price and lower growth expected going ahead.

Outstanding quarterly performance: For 4QFY2011, SEL reported staggering 128.9% yoy top-line growth to `1,047cr (`457.2cr) vs. our estimate of `603.6cr. Ramp-up in execution of captive road BOT projects led to this stupendous growth in revenue. On the EBITDA margin front, SEL posted a decline of 320bp to 8.7% (11.9%) below our estimates of 11.5%, owing to high subcontracting, increased contribution from the low-margin irrigation segment and change in cost escalation policy. Interest and depreciation cost came in line with our estimates. On the earnings front, SEL reported stunning 199.3% yoy growth to `53.9cr (`18.0cr), substantially higher than our expectations of `36.4cr, mainly due to higher revenue.

Outlook and valuation: With the pick-up in award activity from NHAI, we are optimistic on the road segment, given the quantum of opportunities lined up in the sector. We expect the company to log a CAGR of 13.9% and 10.3% in its top line and bottom line, respectively, over FY2011–13 on the back of high base created in FY2011. We believe SEL will take a breather to consolidate before the next leap. At current levels, the stock is trading at valuations of 7.1x FY2013E EPS (adjusted for BOT investments). Owing to the sharp run up in the stock price,
we recommend Accumulate on the stock with a revised SOTP-based target price of
`161(`171) to factor in EBITDA margin pressures.

Sunday, April 24, 2011

Result Flash - Indian Bank - 4QFY2011 - Buy

Result Flash on Indian Bank for 4QFY2011 with a Buy recommendation and a Target Price of Rs269 (12 months).

Indian Bank announced its 4QFY2011 results today, registering a net profit growth of 7% yoy to Rs439cr, however on a sequential basis the net profit declined by 10.7%.The result was below our estimates of Rs486cr mainly on account of higher tax provisioning (43.5% effective tax rate for 4QFY2011) than factored in by us. Net Interest Income (NII) grew by 18.9% yoy which was slightly above our estimates The net advances for the bank grew by a marginal 1.8% qoq and 21.1% yoy to Rs 75,250cr, while the deposits grew by 4.7% qoq and 19.9% yoy to Rs1,05,804cr. Non-interest income grew by 9.2% qoq but came in lower by 7.3% on a yoy basis to Rs272cr. Operating expenses remained muted sequentially but increased by 35.2% on a yoy basis to Rs480cr. Cost to income ratio further improved to 34.7% from 36.9% in 3QFY2011. The bank's asset quality also showed improvement with Gross and Net NPAs in absolute terms declining by 1.6% qoq and 4.8% qoq, respectively. The Gross and Net NPA ratios of the bank both improved marginally by 4 bps each to 0.98% and 0.53%, respectively, with a provision coverage ratio of 84.3% including write-offs (83% in 3QFY2011).

At the CMP, the stock is trading at 0.9x FY2013E ABV. We maintain a Buy recommendation on the stock with the Target Price of Rs269. We may revise our estimates post interaction with the management.

 

 

Exhibit 1: 4QFY2011 Actual vs. Estimates

(Rs cr)

Actual

Estimates

Var (%)

Net interest income

        1,111

        1,045

                  6.3

Non-interest income

            272

            270

                  0.4

Operating income

        1,383

        1,316

                  5.1

Operating expenses

            480

            522

                 (8.1)

Pre-prov. profit

            903

            794

                13.7

Provisions & contingencies

            127

            100

                26.6

PBT

            776

            694

                11.9

Prov. for taxes

            337

            208

                62.1

PAT

            439

            486

                 (9.6)

  Source: Company, Angel Research

 

 

Exhibit 2: 4QFY2011 Performance summary

 

(Rs cr)

4QFY2011

3QFY2011

% chg (qoq)

4QFY2010

% chg  (yoy)

Interest earned

2,594

2,392

8.5

2,025

28.1

Interest expenses

1,483

1,354

9.5

1,091

36.0

Net interest income

1,111

1,038

7.1

934

18.9

Non-interest income

272

249

9.2

293

(7.3)

Operating income

1,383

1,286

7.5

1,227

12.7

Operating expenses

480

474

1.1

355

35.2

Pre-prov. profit

903

812

11.2

872

3.5

Provisions & contingencies

127

54

136.8

214

(40.6)

PBT

776

758

2.4

659

17.8

Prov. for taxes

337

267

26.3

249

35.6

PAT

439

491

(10.7)

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