Buy ILandFS; target of Rs 42: Sushil Finance

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Buy ILandFS; target of Rs 42: Sushil Finance

Sushil Finance is bullish on ILandFS Investment Managers and has recommended buy rating on the stock with a target of Rs 42 in its November 28, 2011 research report.

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Sushil Finance is bullish on ILandFS Investment Managers and has recommended buy rating on the stock with a target of Rs 42 in its November 28, 2011 research report.

"IL&FS Investment Managers Ltd. (IIML) has declared results for the quarter ended September'11 which was in line with our expectations. On sequential basis, Revenues & PAT grew by ~5% to Rs.524 mn & Rs.181 mn respectively."

"Revenues grew by 5% QoQ from Rs.499 mn in Q1FY12 to Rs.524 mn in Q2FY12 which was mainly on back of rupee depreciation over the last few months. In H1FY12, Revenues de-grew by 4% from Rs.1068 mn in H2FY11 to Rs.1023 mn. Company expects complete exit from Leverage India Fund (LIF) in FY13, the carry of which is likely to flow from Q1FY13. Operating profit grew by ~13% QoQ to Rs.280 mn in Q2FY12 which was mainly on account of lower other expenses which de- grew by ~6% QoQ to Rs.113 mn. Operating profit margins improved by 360 bps from 49.9% in Q1FY12 to 53.5% in Q2FY12. Operating profit de- grew by ~10% to Rs.529 mn in H1FY12 while margins declined by 300 bps to 51.7%. Net profit grew by 5% QoQ from Rs.172 mn to Rs.181 mn in Q2FY12 whereas margins remained flat at 34.6%. Net profit for H1FY12 was almost flat at Rs.353 mn while margins improved by 200 bps to 34.5%. EPS for Q2FY12 & H1FY12 stood flat at Rs.0.9 & Rs.1.7 respectively."

"IIML has reported decent set of numbers for the quarter ended September'11 which was inline with our expectations. Strong investment track record, high management credibility coupled with its sound business model would enable the Company to grow in future. Value unlocking by the way of carry profit from FY13 onwards is likely to be the major growth catalyst for the Company going ahead. However considering the increase in global uncertainty & delay in fund raising, we have lowered down our net fund raising estimate by ~$500 mn to $3.2 bn in FY13E. We have valued the Company based on SOTP of its assured annuity income (MCap/AUM) and NPV of its carry profits. At the CMP of Rs.28, the stock is trading at 0.039x MCap/AUM (FY13E). The stock has corrected sharply in last couple of months resulting into high dividend yield of ~5.4%. Hence, considering all the above investment arguments, we maintain our 'BUY' rating on the stock with a revised target price of Rs 42," says Sushil Finance research report.

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