Accumulate Andhra Bank; target of Rs 130: KRChoksey

KRChoksey is bullish on Andhra Bank and has recommended accumulate rating on the stock with a target of Rs 130 in its May 08, 2012 research report.

“Andhra Bank reported steady net earnings of Rs 340 crore which is up 8.6% y-o-y & 12.1% q-o-q driven by improvement in core operating metrics. NII grew 6.1% y-o-y but 7.1% sequentially mainly due to margins pressures. NIM contracted 47bps q-o-q to 3.34% due to funding pressures and interest reversal on incremental slippages. Advance growth outpaced deposit growth as a result CD ratio stood at 80.0%, 170bps higher q-o-q. Fall in forex income and muted fee income growth led to 23.1% y-o-y/ 2.3% q-o-q decline in non interest income. Core operating profit ex. treasury profits were down 1.3% y-o-y/ 15.1% q-o-q. The bank has restructured loans amounting to Rs2300 crore (2.7% of advances) mainly attributable to Rajasthan SEB (Rs1200 crore) and Air India while slippages were Rs472 crore (2.1%). However the bank saw strong growth in recovery and up gradation sequentially which resulted into decline in NPAs. Provisions went down 21.2% q-o-q due to one offs (NPV loss) in Q3FY12. Deposits and advances growth were 7.3% q-o-q & 8.3% q-o-q during the quarter. CASA ratio stood at 26.4%, down 21bps q-o-q. Upgrade to ACCUMULATE.”

“Net interest income grew 6.1% y-o-y but down 7.1% q-o-q to Rs 914 crore driven by 47bps sequentially margins contraction. Net interest margin stood at 3.34%; will likely to moderate ~ 15- 20bps in FY13 given the higher proportion of wholesale loans and lower CASA ratio. Gross and Net NPAs declined sequentially to 2.12% and 0.91% respectively with provision coverage ratio 71%. Slippages increased 24% q-o-q which was entirely offset by strong recovery and up-gradation. The bank has restructured loans amounting to Rs2300 crore mainly coming from Air India and Rajasthan SEB, taking restructured assets to 7.2% of advances. The management has indicated Rs1000 crore(1% of advances)loans to be restructured in FY13.”

“Andhra Bank delivered steady earnings in tough quarter. Sharp margin contraction, subdued non interest income, industry average business growth and mixed bag asset quality trend were key highlights from the result. Slightly higher than industry growth outlook, moderation in margins will partially offset by decline in provisions in FY13. We expect Andhra Bank to deliver 18.7% CAGR in net earnings over FY12-FY14. Currently stock is attractively trading at 0.9x P/ABV on FY13e book. We have maintained our FY13 earnings estimate and introduced FY14 estimate. We recommend ACCUMULATE the stock with target price of Rs 130,” says KRChoksey research report. 

Non-Institutions holding more than 90% in Indian cos

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