Category: Equity Research

SBI reported better-than-expected earnings – with NII growing 4% yoy and 9% ahead of estimates, PAT grew 42% to Rs23.3 bn and was 15% ahead of estimates. Asset quality trends were strong – incremental delinquency at 1.5% annualized and total restructured loans at 3.8%. Expect the positive traction on margins and asset quality to continue over the next few quarters.

A key concern for SBI has been its low margins, especially after its huge deposit mobilization in 2QFY09 and 3QFY09. SBI reported a 2.3% margin in 1QFY10, almost similar to its 4QFY09 margin. (more…)

Punj Lloyd’s 1QFY10 PAT at Rs1272mn up 30% YoY was 41% ahead of CIRA estimates of Rs902mn on better-than-expected margin expansion of 188bps v/s CIRA expectations of +51bps.

The company booked Rs99.4bn of orders in 1QFY10 taking the order backlog to Rs279bn up 38% YoY v/s CIRA expectations of Rs275bn. Execution was in line with expectations with sales of Rs29.5bn, which was more or less in line with CIRA expectations of Rs29.1bn (more…)

HDFC Bank’s 1Q10 profits were slightly lower than our estimates, but it was a tough quarter and on the face of it reflects in lower core operating profitability (+14% yoy) and loan growth (+7% yoy). However, HDBK’s underlying operating parameters are as strong as ever with strong NIMs, few quality concerns, healthy deposit mix, reasonable growth and robust profitability.

Core operating profits grew slower and fee growth moderated. However, NIMs remained above 4% (HDBK has been a model of consistency), costs were in check, and the cushion from high trading gains was used to provide aggressively for loan loss charges. (more…)

Axis reported 70% growth in net profits in 1Q09 to Rs5.6bn, which came ahead of Reuters consensus. NIM and trading income surprised positively. But higher-than-anticipated loan restructuring in 1Q was a negative surprise – Axis restructured Rs10bn of loans in 1Q09 (vs. Rs6.6bn in 4Q08). The key issue in our view is whether the loan restructuring cycle is likely to end soon. (more…)

UBS Investment Research in a note on Reliance Industries Ltd has recommended a SELL as they see increased business and regulatory risks.

The government has now allowed tax holiday under section 80-IB(9) of the IT Act to be extended to natural gas only for NELP VIII. The value of RIL’s E&P segment accrues from blocks from NELP I-VII. If we were to assume no tax benefits on gas production, UBS estimates for RIL’s EPS in FY10 would be lower by 12% at Rs104 and price target (more…)

We attempt to analyse the impact to GAIL’s DCF of the tax incentives provided in yesterday’s Union Budget for gas pipelines (Section 35AD – almost entire investment on gas pipelines to be made tax deductible).

As per our analysis DCF value could increase by ~Rs20/share (from Rs339 currently) due to the tax benefits accruing as the cash tax payable declines (more…)