>ALLAHBAD BANK has once again reported strong PAT

Allahabad Bank has once again reported strong PAT of Rs 5604.3mn, up 34.8%YoY which was way ahead of our estimates of Rs 4697.6mn. NII for the quarter grew by 31.3% YoY ahead of our/street estimates while NIMs of the bank was maintained at 3.5%. Higher increase in profits was also supported by sharp increase in other income by 35.2% to Rs 3484.1mn. ALBK reported slippages to the tune of Rs 5.9bn while restructured assets stood at Rs 10.5bn. GNPA and NNPA of the bank increased by 9bps and 10bps to 1.9% and 0.8% respectively.


The stock is currently trading at 0.7x of its FY13E ABV. We value the standalone business at 0.9x of its FY13E ABV at Rs 217.6 and maintain our buy rating on the stock with Target Price of Rs 196.


Key Highlights
■ Lower tax rate boost profits: ALBK has provided lower tax rate of 7.9% since it has not availed tax benefits earlier on certain items like rural advances, priority sector advances, MIS, etc. which has helped to boost profits above our expectation. Also, management has guided in the last concall to avail Rs 3bn of tax benefits which will translate into 21% tax rate for the full year FY12 as compared to 26% in FY11.


■ Advances grew sequentially; NIMs remain stable: Advances for the quarter grew 4.9% sequentially to Rs 1tn due to strong growth in agri and corporate advances while deposits for the quarter grew by 2.3% sequentially thereby improving CD ratio to 69.1%. In addition, NIMs of the bank remained stable at 3.5%.


■ Asset quality remains stable, restructured assets rise significantly: Asset quality of the bank remained stable with Gross NPA and NNPA at 1.8% and 0.7% respectively. Slippages during the quarter stood at Rs 5.9bn which includes one big account from footwear industry situated in North of Rs 1.2bn. Major chunk of slippages was from priority sector lending which constituted 60% of the slippages. Management has denied having any exposure to Kingfisher or GTL. The total outstanding restructured advances stood at Rs 38.2bn in which Rs 2.6bn have slipped into the NPL category. Total restructured amount during the quarter stood at Rs 10.5bn. No restructuring took place for the SEBs. However, management has indicated to restructure Rs 6bn of Rajasthan State Electricity Board in the coming quarter.

RISH TRADER

>JYOTI STRUCTURES LIMITED: Revenue growth guidance would depend upon the clearances and payments made by the clients.

Jyoti Structures Ltd (JSL) Q3FY12 results were below our expectation on execution getting impacted due to delay in clearances and payments by clients. During the quarter, the company reported 6.5% yoy growth in net revenue at Rs 6 bn and PAT declined by 44% yoy to Rs 138 mn. The decline in PAT was on account of 127 bps decline in EBITDA margins and 63.7% yoy rise in interest expenses. The company added Rs 5.1 bn of new orders resulting in an order backlog of Rs 42.9 bn at the end of the quarter. The achievement of 20% revenue growth guidance would depend upon the clearances and payments made by the clients.




Key Highlights
■ Q3FY12 revenue grew in single digit at 6.5% yoy: The net revenue of JSL witnessed single digit growth of 6.5% on yoy in Q3FY12 and was below our expectations. The delay in clearances from various government departments and payment related issues from certain clients resulted into slower execution of orders. Currently 15-20% of the projects are slow moving and these are from state utilities from UP, Tamil Nadu, DVC, etc. The achievement of the guidance of 20% revenue growth would depend upon the clearances and payments made by the clients.

■  PAT declined on lower margin and higher interest expenses: In the quarter, the EBITDA margin declined by 127 bps yoy to 10.1% on higher erection & subcontracting expenses and other expenses which included MTM forex losses. The EBITDA for the quarter declined by 5.3% yoy to Rs 595.5 mn. The interest cost grew by 63.7% yoy to Rs 310 mn on account of increase in working capital loan. The delay in payment from some of the SEBs resulted into this. In addition the average cost of debt also remained high at 12-12.5%. As a result, the PAT for the quarter declined by 44.2% yoy to Rs 138 mn.


■ Rs 5.1 bn of order added in Q3FY12: During the quarter, JSL added Rs 5.1 bn of new orders. The current order backlog stands at Rs 42.9 bn. 62% of orders are from transmission line, 19% from rural electrification and rest 19% are from substation. The current order book comprises 42% of PGCIL orders, 8% of private sector orders and 19% from Maharashtra T&D companies, 9% from MP and balance from other state SEBs like Chattisgarh, Tamil Nadu, UP, West Bengal, J&K, Assam, etc.

■  Over Rs 100-110 bn of opportunity in the next few months: The management expects over Rs 11 bn of new opportunity in T&D EPC from various states utilities of MP & Rajasthan. It expects Rs 40 bn of new opportunity from PGCIL which includes Rs 36 bn of bid yet to open and Rs 4 bn of new tenders. Besides this, JSL expects Rs 60 bn of EPC opportunity from BOOT projects from states such as UP, Rajasthan, etc and private players. Besides this, it is looking at Rs 6 bn opportunity from Maharashtra and Bangladesh.


■  Outlook & Valuation
We have downgraded our revenue estimates for FY12E & FY13E with the assumption of delay in execution of 15-20% of its orders and have also reduced our margin estimates. We have downgraded our EPS estimates for FY12E and FY13E by over 20% to Rs 9.7 and Rs 10 respectively. Currently, the stock trades at FY12E & FY13E P/E of 4.7x and 4.6x respectively. We maintain BUY on the stock with the revised target price of Rs 60. At our target price the stock trades at FY12E and FY13E P/E of 6.2x and 6 x respectively.


RISH TRADER

>CANARA BANK: Focus remains on Non-Performing Asset (NPA) Recovery (KJMC Insitutional Research)

■ Loan book to grow by 20% CAGR during FY11-13E: CBK has a very strong track record of loan book growing above industry standards by 24% CAGR FY09‐11 while deposits grew by 25.4% CAGR FY09‐11. We believe loan book to grow moderately by 20% CAGR FY11 – 13E given the global scenario looking bleak. CBK will continue to maintain higher than industry growth rates supported by strong sanction pipeline in infrastructure segment.


■ Stress on asset quality to remain; expecting strong recoveries: CBKs asset quality has been stable and best in its peer group. With bank moving to system based NPA recognition, Gross and Net NPA increased to 1.7% and 1.4% respectively which is still better as compared to its peers. We believe stress on asset quality will continue to remain in next two quarters given the fact of higher interest cost and slowdown in the world economy.


■ Pressure on NIMs to ease in FY13E: In H1 FY12 NIMs of the bank were under pressure due to high interest rates. We expect pressure to ease out in FY13E once inflation will come down giving room for RBI to cut repo rate. We expect NIMs to fall by 27bps to 2.4% in FY12E and improve in FY13E to 2.5%


■ Bank delivering consistent return ratios: CBK has been consistent in delivering strong return ratios RoANW and RoAA above 20% and 1% respectively in last two years. In FY11, RoANW and RoAA stood at 23.2% and 1.3% respectively reflecting its strong performance in the bottom line. However, we expect decline in both RoANW and RoAA in FY12E to 17.3% and 1.0% respectively due to higher interest cost impacting bottom line which will improve back in FY13E to 21.2% and 1.2% respectively.

RISH TRADER