Buy Development Credit Bank For Target Rs.64 

Displayed An All Round Performance
Development Credit Bank (DCB) reported good results yet again; driven by strong growth in advances leading to increase in NII, cost efficiency leading to an improvement in cost to income ratio and continuous efforts of the bank to improve profitability. PAT increased 72.5% YoY and 21.6% QoQ to Rs 26.9 cr. The bank is on the right track in terms of most of the performance parameters. The bank has been reporting profit for ten consecutive quarters driven by NII, fee income, cost efficiency and controlled credit cost (expected range 0.5% for
FY13E). We believe that the bank will embark on expansion plans over the next 2-3 years and gear itself for next innings. We expect the bank to report 52.9% CAGR in PAT over FY12-FY14E leading to RoE of 12.5% and RoA of 1.1% for FY14E. At CMP, the stock is trading at 1.29x and 1.14x FY13E and FY14E Adj BVPS and 12.21x and 9.23x FY13E and FY14E EPS respectively which we believe is attractive and therefore we continue to maintain our BUY rating on the stock. Our target price for the stock is Rs 64 based on P/ABV multiple of 1.5x on its FY14E adjusted book value of Rs.42.6 per share.
* Net Interest Margin (NIM) stood at 3.38% in Q3FY13 vs 3.24% in Q2FY13 and 3.37% in Q3FY12 led by robust loan growth, 4 bps increase in yield on advances and fund raising via preferential allotment.
* Going forward, Management does not expect the current levels of NIM to be sustainable as the bank has to ramp up its priority sector lending.
* The cost to income ratio of the bank witnessed an improvement and came down below 70% for the first time in the history of the bank after it turned profitable. The improvement is well within the targeted levels of the Management and we expect this to continue going forward.
* DCB reported whopping growth in advances both on QoQ and YoY basis (+38.5% YoY and 5.2% QoQ) at Rs 5,964 cr. Management  maintains that continued traction is seen in advances indicating that loan growth will remain considerably strong going forward.
* The bank’s CASA ratio deteriorated both QoQ and YoY basis and stood at 28.9% in Q3FY13; falling first time below the 30% level. CASA deposits increased by a mere Rs 10 cr as compared to strong growth in deposits leading to the decline in the ratio.
* Although the asset quality of the bank showed some improvement with Gross NPA declining by 8.8% YoY on absolute basis but deteriorated by 3.5% QoQ basis. Gross NPA ratio and Net NPA ratio were at 3.8% and 0.7% respectively in Q3FY13.
* The bank witnessed an increase in slippages during the quarter considering the overall stress in the environment. Fresh slippages during the quarter stood at Rs 20 cr vs Rs 11 cr of slippage in Q2FY13 pertaining to SME and MSME loan book.
* The provision coverage ratio stood flat at 88.04% in Q3FY13.
* Capital Adequacy Ratio stood at 13.71% as on Dec 2012 of which Tier I Ratio stood at 12.63%.
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 Buy TTK Prestige Limited For Target Rs.3955.00


TTK Prestige Limited, has emerged as India’s largest kitchen appliances company catering to the needs of home makers in the country.
* During the quarter ended, the robustgrowth of Net Profit of the company is increased by 27.57% to Rs. 441.00 million.
* Net addition to PSK (Prestige Smart Kitchen) Net work during the quarter was 38, taking the total to 428 across 209 Towns in 21 states.
*TTK Prestige Ltd has informed that the Madras High Court have sanctioned the Scheme of Amalgamation amalgamating Prestige  Housewares India Ltd, a TTK Group Company with TTK Prestige Ltd.
* The establishment of new facility in Gujarat is in progress and the initial phase is expected to be commissioned during the last quarter of the current financial year.
* TTK Prestige Ltd has received US Patent for its Microwave Pressure Cooker under Patent No.8247751.
* Net Sales and PAT of the company are expected to grow at a CAGR of 32% and 27% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
TTK Prestige Limited, has emerged as India’s largest kitchen appliances company catering to the needs of home makers in the country,  reported its financial results for the quarter ended 31st Dec, 2012. The third quarter witnesses a healthy increase in overall sales as well as profitability enhanced, festive sales took place in October & November of the current financial year.
The company’s net profit jumps to Rs.441.00 millions against Rs.345.70 million in the corresponding quarter ending of previous year, an increase of 27.57%. Revenue for the quarter rose 30.75% to Rs.4371.30 million from Rs.3343.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.38.96 a share during the quarter, registering 27.57% increase over previous year period. Profit before interest, depreciation and tax is Rs.630.60 millions as against Rs.540.70 millions in the corresponding
period of the previous year.
Outlook and Conclusion
*  At the current market price of Rs.3531.00, the stock P/E ratio is at 28.00 x FY13E and 23.40 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.126.13 and Rs.150.87 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 32% and 27% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 18.10 x for FY13E and 14.99 x for FY14E.
* Price to Book Value of the stock is expected to be at 9.34 x and 6.68 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.3955.00 for Medium to Long term investment.
 

Buy Federal Bank For Target Rs.580 



Federal bank’s Q3FY13 numbers were much better than reported numbers as one‐ off losses (Rs200m interest reversal + Rs600m NAFED provisioning) significantly exceeded one‐off cap gains from CARE IPO. Growth has picked up after the de‐ bulking in H1FY13 and asset quality (excl. NAFED) has also held up better‐than‐ expected. With strain from legacy assets coming off and high opex growth phase
nearing end, we expect ROEs to move up to ~15.5‐16% over FY13‐15 after being stuck in a narrow band of 12‐14% for the last five years and thus, maintain our ‘BUY’ rating with a PT of Rs580/share.
* Many one‐offs in Q3FY13 as expected: (1) Capital gain of Rs400m on 2% stake sale in CARE IPO (2) Rs600m provision for their Rs2bn NAFED exposure which is also recorded as NPA and (3) Rs200m interest reversal leading to a miss on NII. Adjusted for one‐offs, PPOP was in line with expectations and adjusted for NAFED, asset quality surprised.
* Growth picks up; adjusted margins in line: Growth momentum has picked up after the corporate book de-bulking in H1FY13, with 9% sequential loan growth driven by retail (7% QoQ) and large corporate (14% QoQ). NIM adjusted for the one-off interest reversal of Rs200m improved by ~6bps QoQ was in line with our expectations and management guidance.
* Asset quality better than expected: Gross NPA inched up QoQ largely due to recognition of Rs2bn NAFED exposure as NPA, adjusted for which Gross NPA was down QoQ. Provisions were also largely linked to NAFED at Rs0.6bn as FB decided to marginally run-down NPA coverage on their earlier NPA pool. Segmental slippages data indicate a positive trend, with slippages coming off in the SME and large corporate segment (excl. NAFED) and segmental ratings for their large/SME assets improving v/s Q2FY13.
* Other highlights: (1) Opex was in line with estimates. However, with Federal bank closing on their 1100 branch target (1028 branches in Q3FY13), we believe opex growth will moderate from FY14 (2) Non-interest income was aided by treasury/CARE/recovery of ~Rs1bn adjusted for which core fee income growth was ~10% which is under management guidance on core fees.
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 Buy Yes Bank Ltd For Target Rs.589.00


YES BANK, India’s new age private sector Bank, is a state-of-the-art high quality, customer-centric, service-driven Bank catering to the “Future Businesses of India”.
* Bank’s Capital Adequacy Ratio registered at 18.00% as on 31.12.12.
* CASA deposits grew by 74.9% y-o-y to Rs. 103408 mn taking the CASA ratio to 18.3% as at December 31, 2012 up from12.6% as of December 31, 2011.
* Net profit for Q3 FY13 was up 34.72% to Rs. 3423.10 mn as compared to Rs. 2540.90 mn for Q3FY12 driven primarily by sustained & diversified revenue growth.
* YES BANK added 12 branches across the country during the quarter, taking the total branch count to 412.
* Total Deposits grew by 20.2% to Rs. 564005 mn as at December 31, 2012 from Rs.469291 mn as at December 30, 2011.
* YES BANK has partnered with American Express to offer a credit card to retail and micro SME customers.
* Net Income and PAT of the company are expected to grow at a CAGR of 38% and 29% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
The company’s net profit jumps to Rs. 3423.10 million as against Rs. 2540.90 million in the corresponding quarter ending of previous year, an increase of 34.72%. Revenue for the quarter rose 26.70% to Rs. 21336.40 million from Rs. 16840.60 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 9.57 a share during the quarter, registering 32.60% an increase over previous year period. Net Interest Income is Rs. 8975.10 millions as against Rs. 6390.10 millions in the corresponding period of the
previous year.
Outlook and Conclusion
According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalized Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent.
*  At the current market price of Rs.526.00, the stock P/E ratio is at 11.44 x FY13E and 9.28 x FY14E respectively.
*  Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs. 35.30 and Rs.43.55 respectively.
*  Net Income and PAT of the company are expected to grow at a CAGR of 38% and 29% over 2011 to 2014E respectively.
*  On the basis of Debt-Equity Ratio, the stock trades at 49.18 x for FY13E and 44.81 x for FY14E.
*  Price to Book Value of the stock is expected to be at 2.43 x and 1.93 x for FY13E and FY14E respectively.
* We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 589.00 for Medium to Long term investment.
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Buy Petronet LNG Ltd For Target Rs.182


Outlook
On the account of its aggressive capex plans to increase capacity from 10.0mn tonne to 17.5mn tonne over the next 3-4 years, we believe PLL is well-poised to benefit from the gas demand-supply mismatch in the country. However, PLL’s earnings growth over the period FY14-15 is sensitive to timely completion of pipeline projects of GAIL, and preparedness of end-users to switch over to gas. Nevertheless we believe backed by the long-term capacity contracts (such as the one with Gujarat State Petroleum Corpn) and news flow on pipeline completion are key triggers to the stock. We maintain a BUY on Petronet LNG (PLL) with a target price of Rs.182 (11.2x FY14 valuations).
Key Takeaways
• Strong operation of the Dahej terminal at 110% utilisation and higher spot margin aided Petronet LNG to post a net profit growth of 1.2% qoq to Rs.318.5 crore. The revenue for the quarter stood at Rs.8375 crore, up 11.9% qoq. The volumes for the quarter stood at 140.6 tbtus, higher by 4.2% qoq on the back of higher demand from some fertilizers units for this quarter. While the marketing margins on the spot and short term cargo had increased on the yoy basis they have has declined on a qoq basis. We expect the margins to normalize, however we have not factored the same in our model
• During the quarter, the company regassified 141.5 TBTU of LNG, down 2.4% Y-o-Y, however, it grew 4.8% sequentially; ahead of our estimated volumes of 138.4 TBTU. In the quarter, PLNG capacity utilization rose to ~110% up from ~105% in Q2FY13 and ~113% in Q3FY12. The share of long-term cargos increased 200bps QoQ to 69% whereas that of third-party volumes declined 300bps QoQ and 500bps YoY to 10%.
• Petronet’s Kochi Terminal is likely to be commissioned in Q1FY14 as against our earlier expectation of Q1CY13. Kochi volumes are likely to be slower than expected on account of the delays in the GAIL's Kochi- Koottanad- Bangalore-Mangalore Pipeline. PLNG management stated that Kochi refinery and FACT are likely to consume around 0.6 mmscmd (~0.17 mmt) and 1.2 mmscmd (~0.34 mmt) respectively at the current capacity levels.
• The second jetty at Dahej in on schedule. The capex requirement of the second jetty at Dahej is ~Rs. 10 bn. PLNG has already spent ~Rs. 0.3 bn. PLNG regassification capacity is likely to go up to 12-12.5 mmt when the second jetty becomes operational. PLNG is targeting to commission the second jetty by Q1 CY2014.
• The expansion of the Dahej capacity by 5 mmtpa (by 2015) is in process. The company has already shortlisted EPC bidders and  environmental clearance process is on track.
• On Gangavaram, the company is looking at the possibility of bringing a Floating storage and re-gasification unit (FSRU) of about 2-3 mmt capacity by the end of 2014 while the land based terminal is likely to be commission by the end of 2016.

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