12/03/13

Buy DLF Ltd For Target Rs.298


Non-core asset sales finally pick up: DLF’s much awaited non-core asset sale program has finally caught steam, with the sale of ‘Aman’ hotel chain  at Rs16.5bn (US$300m), following the sale of its Mumbai Land Parcel to Lodha at Rs27bn. The third large ticket asset sale is the partial sale of its energy business to Bharat light & power for Rs2.8bn, with the management confident of divestment of the balance wind power units by March 2013. The three transactions put together have generated ~Rs46.3bn for DLF.
Spur EBITDA, reduce Debt: DLF’s target is to spur EBIDTA through additional leasing, high value Phase V launches, New Gurgaon launches as well key launches in its ‘Rest of India’ portfolio. It targets an EBITDA of Rs82.5bn which shall result in FCF of Rs30bn. This, coupled with two capital issuances totalling to Rs55bn shall lead to targeted debt levels of Rs100bn which can be easily serviced by its rental portfolio.
A new look to the balance sheet: The visibility to pare down debt, which at the end of Q3FY13 stood at Rs213bn (net debt), has increased. DLF expects to bring down net debt to Rs200bn at the end of FY13, post the completion of the non-core asset sale target of Rs50bn as well as the launch of the ‘Magnolias’ & ‘Park Place 2’ and further down to Rs150bn, post the equity issuance and a couple of quarters into the launch of the projects. As per our estimates, we expect net debt to trim down to levels of Rs168.5bn by March FY14 and Rs143.1bn by FY15 which shall translate to a DER of 0.60 by FY14 and 0.49 by FY15 (Gross Debt: Equity).
Outlook & Valuations: Visibility on debt reduction has increased substantially with asset sales, forthcoming
launches and fresh equity issuance. The stronger balance sheet, coupled with positive operational cash flows, is likely to provide an impetus to new launches and stabilize operations for the company. We maintain our ‘BUY’ rating on the stock. The company’s NAV stands at Rs351 to which we are attributing a 15% discount to arrive at our target price of Rs298.
   Hold Yes Bank Ltd For Target 

Rs.578


Strong operating performance; beats estimate once again
Yes Bank reported strong results above expectations on all fronts of net interest income, non interest income, asset quality and overall profitability. The bank reported PAT of Rs.342.3 cr in Q3FY13 resulting in a growth of 34.7% on a YoY basis and 11.8% on QoQ basis. Going forward, we expect Yes Bank to continue to report strong growth in advances and overall profitability. Traction in CASA accounts will continue to drive margin performance. The bank has been able to have a strong foothold on the non interest income front which enables the bank
to generate higher return ratios (RoA of 1.5%+ and RoE of 24%+). Driven by the strong performance, we expect the bank’s profitability to grow at 30.7% CAGR over FY12-FY14E.
At CMP, the stock is trading at a PE of 14.45x and 12.28x of FY13E and FY14E EPS and at an adjusted P/BV of 3.23x and 2.27x FY13E and FY14E Adj BV. We arrive at a target price of Rs 578 (2.5x FY14E ABV) indicating potential upside of 10.3% from current levels. We continue to maintain our HOLD rating on the stock.

* Total Customer Assets (Loans + Credit Substitutes) grew by 27.4% to Rs 55,750 cr in Q3FY13 from Rs 43,750 cr in Q3FY12.
* CASA deposits increased by 74.9% YoY and 14.5% QoQ to Rs 10,341 cr taking the CASA ratio to 18.3% in Q3FY13.
* Net Interest Income increased by 36.7% YoY to Rs 524 cr in Q3FY13.
* NIM stood at 3% in Q3FY13; an improvement of 20 bps on YoY basis and 10 bps on QoQ basis. The primary reason for improvement in NIMs was reduction of cost of funds by 20 bps on QoQ basis.
* The growth in total income outpaced the growth in total expenses leading to an improvement in cost to income ratio (37.2%) on both QoQ and YoY basis.
* Gross NPA declined 25.9% QoQ to Rs.76.2 Cr in Q3FY13. Gross NPAs and Net NPAs stood at 0.17% & 0.04%, respectively in Q2FY13.
* There was no new restructuring in the current quarter and the bank’s restructured assets stood at 0.43% of gross advances at Rs 189.1 cr in Q3FY13.
*The bank has made provisions on the media account and provided ~90 cr (80% of exposure) during Q2/Q3FY13. On remaining 20% the bank does not anticipate further requirement of provisioning. Management expects 10- 15% recovery in short-term and another 20-25% in next 3-4quarters.
* Provisioning coverage ratio of the bank (including technical write off) stood at 79.6% in Q3FY13.
* RoA improved to 1.6% in Q3FY13 and RoE stood at 24.1%.
* Capital Adequacy Ratio of the Bank as on Q3FY13 stood at 18% with Tier I ratio of 9.02%.
* The bank added 12 new branches taking the total branch network to 412 in Q3FY13 and added approximately 29 ATMs in Q3FY13 resulting in increase in other operating expenses.
 Buy Ankit Metal & Power Limited For Target Rs.18.00




Ankit Metal & Power Limited is the part of the Rs. 38000 millions SKP Group, engaged in producing Rolled products comprising of Sponge Iron, Steel Melting Shop, Billets and Rolling Mill.
* The company’s net sales registered an 19.90% increase and stood at a record Rs. 2995.43 million from Rs. 2498.35 million over the  corresponding quarter last year.
* The company’s net profit registered a 125.10% increase and stood at a record Rs. 127.72 million from Rs. 56.74 million over the corresponding quarter last year.
* AMPL is in the process of establishing a 600000 TPA pelletisation facility that will utilize iron ore fines & optimize raw material costs for DRI operations & ultimately TMT bars production.
* AMPL is enhancing the capacity of its wire rod mill from 100000 TPA to 180000 TPA & modifying the wire rod mill from MS to SS.
* Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 40% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Ankit Metal & Power Limited is the part of the Rs. 38000 millions SKP Group, engaged in producing Rolled products comprising of Sponge Iron, Steel Melting Shop, Billets and Rolling Mill, reported its financial results for the quarter ended 31DEC, 2012.
The company’s net profit jumps to Rs.127.72 million against Rs.56.74 million in the corresponding quarter ending of previous year, an increase of 125.10%. Revenue for the quarter rose 19.90% to Rs.2995.43 million from Rs.2498.35 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.1.34 a share during the quarter, registering 125.10% decrease over previous year period. Profit before interest, depreciation and tax is Rs.395.89 millions as against Rs.180.75 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.16.50, the stock P/E ratio is at 2.77 x FY13E and 2.37 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.96 and Rs.6.95 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 27% and 40% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 0.88 x for FY13E and 0.73 x for FY14E.
* Price to Book Value of the stock is expected to be at 0.31 x and 0.28 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.18.00 for Medium to Long term investment.




 Sector Update : Capital Goods 


We spoke with the management of Blue Star on the outlook for the Airconditioning industry in context of the upcoming busy summer season.
Efficiency norms to be further tightened in January 2014. Enforcement of efficiency norms may make window ACs uncompetitive vis-à-vis split ACs
Recommend BUY on Voltas and maintain Reduce on Blue Star.
Outlook and Recommendation
AC (room as well as central) manufacturers and contractors have struggled in past two years due to sluggish demand and elevated cost pressures. Consequently, stocks have underperformed significantly.
Voltas (CMP Rs 82, TP Rs 104, BUY): Voltas has fallen 39% since its high of Rs 135 in September 2012. In view of the continuing subdued trend in MEP and Room AC segment, we have revised our earnings estimates. However, in view of reasonable valuations, upgrade to BUY with a revised target price of Rs 104 (earlier Rs 110)