Buy Andhra Bank; target of Rs 135: Dolat Capital

“In Q3 FY12, Andhra Bank’s net interest income (NII) grew 17% YoY to Rs 9.8bn- in line with our estimates. Margin remained stable at 3.81% in Q3 FY12 on sequential basis. Net profit de-grew 8.4% YoY to Rs 3bn as against our estimates of Rs 3.7bn and consensus estimate of Rs 3.1bn. The deviation at net profit level was primarily on account of higher provisioning on restructured loan book NPV losses and Investment depreciation (Rs 190mn as against Rs 1mn in Q3 FY11). There was 5.2% decline in gross NPAs on sequential basis; a key positive surprise in the result. Further, lower NPL provisioning (Rs 395mn as against Rs 1.5bn in Q3 FY11) resulted in decline in credit cost to 22bps in Q3 FY12 as against 130bps in Q2 FY12 and 104bps in Q3 FY11). PCR increased to 66.4% as against 61.7% in Q2 FY12.”

“The quarterly result was broadly in line on core income level, with a positive surprise on GNPL front- sequential decline in GNPL and stable margins improved overall performance. The asset quality (particularly on restructuring front) will be a key parameter to watch out for going ahead. We reduce our earnings estimates by 3% and 2% for FY12 and FY13 respectively. We cut the target prices by 9% to Rs 135 at 1x adjusted book value (ABV) FY13 and maintain our Buy rating,” says Dolat Capital research report.

Institutional holding more than 40% in Indian cos

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