May 07, 2012, 01.14 PM | Source: Moneycontrol.com
Emkay Global Financial Services has come out with its report on various stocks. According to the research firm one can accumulate this stocks.
, Emkay Global Financial Services |
Marico is in sweet spot - gain from delta effect of softening of Copra prices alongside robust volume growth potential (improving distribution infrastructure). This is completely in sync with one of three themes in consumer sector; Referring to ‘Rural Steroids Ebbing. Underweight Rural Exhilarants’. We reiterate Marico as our top pick in consumer sector, focus on absolute Ebidta and strong brand efficacy. Forecast for strong earnings performance in ensuing quarters (next 3 quarter), staying in top quartile of consumer universe. We introduce FY14E earnings of Rs8.3/Share and roll-forward valuation to FY14E earnings with target price of Rs191/Share. We retain our ACCUMULATE rating.
NIIT Technologies : We tweak our US$ revenue estimates marginally higher however build in EBITDA margins at 17.6% now (V/s 16.8% earlier) driving a 6%/2% raise in FY13/14E earnings to Rs 36.7/38.7. Valuations at <7x FY13/14E P/E remain attractive for consistently 20%+ ROE’s and ~3.5% dividend yield. Retain ACCUMULATE with a revised TP of Rs 310, based on 8x FY14E earnings (V/s Rs 235 earlier).
Bank of Baroda Q4FY12 results were mixed in form of a) healthy balance sheet growth b) stable operational performance (NIM, CASA) and c) disappointment on asset quality front including restructuring loan portfolio. As highlighted in our Q3FY12 results update, we continue to remain wary on the bank’s ability towards recoveries and up-gradation. For FY12 recoveries and up-gradation as % of opening GNPLs stood at 29% compared to 40- 50%+ for few of the peers. Also with increasing stress in select segments of Infrastructure, iron & steel, shipping we expect slippages / credit cost to remain higher at 1.2%/60bps+ over FY12-14E.
Based on our assumption of higher credit costs, we believe that the RoAs are likely to dip to 1.1% vs 1.3% witnessed in FY12. Also, had it not been for the preferential allotment of the shares to LIC and raising Rs16.5bn, our ABV assumptions for FY13E would have seen a downward revision of ~5% to Rs690. BOB’s current valuations remain quite attractive at 0.9x FY13E/0.8x FY4E ABV. We have lowered our P/ABV multiple to factor in the higher slippage and above mentioned pressure on ABV to 1.1x vs 1.3x earlier. A provision coverage ratio of 80% and strong tier I ratio of 10.8% should provide cushion to the stock. We retain ACCUMUALTE rating with TP of Rs830.
Corporation Bank : Lower CASA proportion and margins has for long have been an area of concern for the bank. CRPBK’s cost of funds by far remains highest amongst the PSU banks with CASA at just 22%. While management has guided a transition towards more granular balance sheet, the actions and benefits are still little far away. On positive side, CRPBK has consistently shown lower slippage rate (1.2%), lean cost structure (1% of assets) and 1% RoA. We have still built in significantly higher credit costs of 80bps for FY13-14E. Even after building in steep credit costs, we expect CRPBK to post 1%/19% RoA/RoE over FY12-14E. The valuations remain attractive at 0.7x FY13 and 0.6x FY14 ABV. Unlike many peer banks CRPBK is yet to receive capital infusion from the central government which will further increase the ABV and pull the valuations lower. Add to that, dividend yield of 6.1% cuts downside further. We have cut our P/ABV multiple to 0.8x (vs 0.9x) taking into account failure of CRPBK to show meaningful improvement in the margins structure. Retain ACCUMULATE rating with TP of Rs460.
Allahabad Bank : We have lowered our FY13E earnings for ALBK by ~13% and ABV by ~7% to take into account higher pressure on NIMs. For FY13E our NIMs assumption now stands at 2.9% vs 3%+ earlier. Even as ALBK disappointed in Q4FY12 on NIMs as well as asset quality front, we are enthused by the fact that ALBK has still provided at 84% on incremental net slippages despite the slippages being higher. Even as we build in a higher slippage rate of 2%/1.8% for FY13/14E, we have built in steep credit costs assumptions in our numbers at 100bps each over the same period. Few other things which provide comfort are (1) higher recovery and upgrade rates at 50% of NPLs (2) lower restructured assets at 4.4% of adv (ex SEB) and (3) lower slippage ratio in restructured assets at 13.9% of the total restructured book at the beginning of the year. We believe that ALBK’s current valuations of 0.9x FY13E/ 0.7x FY14E ABV are attractive looking at average 18.2% RoEs for FY13-14E. We maintain ACCUMULATE with TP of Rs185, lowering it by 7.5% in line with change in ABV assumption for FY13E. One negative on valuations would be that while peer banks like Corporation Bank/Andhra Bank give dividend yield of more than 5%, ALBK’s dividend yield stands at low of 3.5%.
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