Prabhudas Lilladher is bullish on IDFC and has recommended accumulate rating on the stock with a target of Rs 180 in its February 1, 2013 research report.
"IDFC reported in line Q3FY13 adjusted for principal gains. Disbursements have come off from high H1FY13 levels but loan growth remains at the upper end of management guidance (~22% YoY). Margin and asset quality performance continues to remain stable. We expect high margins to sustain in the near term and do not expect any large asset quality disappointment. However, with a possible leverage cap and limited lending opportunities, we do not expect ROEs to cross ~15-16% in the next two years and hence at 1.65x FY14, we maintain our .Accumulate. rating (PT of Rs180/share based on 1.75x FY14 book)."
"IDFC reported flat 12 months spreads at 2.5% which is in line with expectations. Cost benefit from lower wholesale rates have led to an improvement in margins and we see IDFC sustaining these margins in the near term despite increasing share of corporate loans and low margin refinancing business. With disbursements coming off to Rs26bn from >Rs50bn in H1FY13, loan book remained flat QoQ bringing down the YoY growth from 36% in Q2FY13 to ~22% which is still at the higher end of management guidance. Though fresh sanctions have been coming off, management remains confident of delivering ~15-20% growth in FY13/14 aided by corporate loans, refinancing and disbursements from existing sanctions. IDFC has re-aligned their fee reporting in Q3FY13 and adjusted for treasury gains. Fee income was marginally better-than-expected, driven by surprise on AMC fees."
"IDFC has not yet booked any investment gains from NSE in 9M13 and hence, we expect some NSE gains to come in Q4FY13. Gross NPAs was stable QoQ at 0.26% and provisioning at ~1.6% of loans provides significant comfort. IDFC incurred some provisions (Rs150m) on account of its Deccan exposure, apart from which, Rs340m of general provisioning was in line with expectations," says Prabhudas Lilladher research report.
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