qs - bfsi - q1fy16 preview

Banking and NBFC Sector Results Preview

Q1FY16 Earnings Preview Banks Loan Growth Continues in Single Digits Loan growth remained weak in Q1FY16, due to continued slowdown in the economy impacting loan growth in the corporate, SME and retail segments. Loan growth declined to 9.3% in Q1FY16 from 12.6% in Q4FY15. Deposit growth also stood low at 11.4% in Q1FY16 as against 12.8% in Q4FY15. Going ahead, we expect 1-2 quarters to remain tough for growth and asset quality and banks should start growing their books in Q4FY16 once the economy starts reviving due to effective addressal of bottlenecks surrounding various projects and full impact of interest rate cuts that will be felt in 3-6 months. NIMs to be Largely Stable, Treasury Performance to be Weak With lower wholesale lending rates as compared to last year and full impact of 15-20bps rate cuts by banks done in mid Q1FY16 to take effect in Q2FY16, we expect NIMs of most banks to remain stable despite Q1FY16 being a lean quarter. With rise in bond yields by 15bps QoQ, the treasury performance of banks is expected to be weaker. Asset Quality Stress to Remain at Elevated Levels for PSU Banks Asset quality of most PSU banks is expected to be under pressure in Q1FY15 due to high exposure to troubled sectors like infrastructure, real estate, textiles, iron and steel. With the special dispensation provided by RBI for restructuring assets having ended on March 31, 2015, the slippages are expected to trend higher in case of restructured assets coming out of moratorium. Some accounts where the CDR approval was pending as on March 31, 2015 have been restructured in Q1FY16. In case of private banks where restructured assets are lower, the slippage trend is expected to be stable. Axis Bank expects less stressed asset addition but the performance of its restructured assets will be a key monitorable. Federal Bank is likely to see lesser slippages in the corporate segment. With Central government and RBIs thrust on banks to improve their asset quality, continued asset sales to ARCs (but in lower amount than previous quarters) will be another feature of this quarter. NBFCs Unlikely to See Escalation in Loan Growth Most NBFCs are unlikely to see escalation in growth this quarter due to interest rates still being higher and pressure on asset quality. NBFCs which are predominantly wholesale funded are expected to see some improvement in their NIMs due to lower wholesale funding costs. In case of Bajaj Finance, NIM is expected to decline on a YoY basis, as the company is expanding presence in low risk segments, but to improve on a QoQ basis as Q1 is a peak season for the company. Asset quality will be a key monitorable, especially in the case of power funding IFCs. Sector View and Top Picks Despite headwinds on the macro front and concerns surrounding bad assets, we still have a positive view on the banking sector. On the valuation front, PSU banks are looking attractive (still at 50-70% discount from their peak multiples achieved in 2007), and there is potential for upside in earnings if credit growth picks up in the coming quarters, due to improvement in economy and improvement in the margins upon downward repricing of deposit rates. However, asset quality improvement is expected to happen at a slow and gradual pace and in the near term, the performance of restructured assets coming out of moratorium will be a key monitorable. The recent announcement of capital infusion of ~Rs 600bn in PSU banks by the government in next 2 years will be positive for PSU banks. From our coverage, we are positive on Federal Bank, Canara Bank, Indian Bank, PNB and Bank of Baroda. In HFCs we like LIC Housing and GIC Housing. In IFCs, we are positive on PFC and REC due to good loan growth visibility with outstanding sanctions at 0.5-0.7x current loan book and attractive valuations. We are also positive on IDFC due to expected growth after its banking foray in October 2015. Page 1

BFSI Sector Q1FY16 Results Preview Page 2

Quantum Securities

QS BFSI Coverage Universe

Company Name CMP (Rs)

Target

(Rs) Rating P/ABV (x) P/E (x) RoAE (%)

RoAA (%) / RoCE (%)

FY16E FY17E FY16E FY17E FY16E FY17E FY16E FY17E Axis Bank 582 620 Hold 2.8 2.4 15.6 13.1 18.5 19.0 1.8 1.8 Allahabad Bank 93 115 Accum. 0.8 0.7 5.7 3.7 7.7 10.8 0.4 0.5 BOB 156 230 Buy 1.0 0.9 8.2 6.2 10.3 12.5 0.6 0.7 BOI 183 265 Buy 0.9 0.7 6.2 5.0 6.1 7.1 0.3 0.3 Canara Bank 298 520 Buy 0.7 0.6 4.7 3.8 9.6 11.2 0.6 0.6 Federal Bank 78 90 Accum. 1.6 1.4 11.0 9.1 14.7 15.5 1.3 1.4 Indian Bank 137 285 Buy 0.6 0.5 4.4 3.0 9.7 12.8 0.7 0.9 OBC 186 300 Buy 0.5 0.5 7.6 6.3 5.1 6.9 0.3 0.4 PNB 145 195 Buy 1.0 0.8 7.0 5.9 9.5 10.7 0.6 0.6 Vijaya Bank 41 55 Buy 0.7 0.7 6.2 4.4 9.3 12.1 0.4 0.5 Bajaj Finance 5103 5500 Hold 3.9 3.3 25.1 20.4 18.1 17.1 2.9 2.9 Can Fin Homes 770 850 Hold 2.3 2.0 15.7 11.6 15.6 18.5 1.3 1.3 Cholamandalam 705 735 Hold 3.5 2.9 18.3 13.2 17.5 20.7 2.3 2.7 GICHF 220 280 Buy 1.7 1.6 9.4 7.6 18.2 20.5 1.7 1.7 IDFC 156 210 Buy 1.3 1.2 13.6 11.5 10.2 11.1 2.0 2.0 Indiabulls Housing 633 735 Accum. 3.0 2.5 9.6 7.8 32.9 34.0 3.8 3.8 LICHF 462 585 Buy 2.6 2.2 13.3 10.6 20.6 21.8 1.4 1.5 PFC 262 390 Buy 1.0 0.8 4.9 4.1 20.4 20.7 2.9 2.9 REC 286 455 Buy 1.0 0.8 4.6 3.9 22.4 22.5 3.0 3.1 Shriram City 1683 2365 Buy 2.5 2.2 16.5 13.3 15.4 16.7 3.5 3.7 Sundaram Fin 1567 1600 Hold 5.4 4.7 33.4 28.9 16.5 16.9 2.9 3.0 CARE 1450 1750 Accum. 10.0 8.2 25.2 20.6 42.8 43.6 37.1 34.9

Source: QS Research Q1FY16 Result Preview of Companies Under Coverage Axis Bank Ltd CMP Rs 582, Rating Hold, FY17E Target Rs 620 Loan growth is expected to be at 20.7% YoY despite decline in the system loan growth. NIM is expected to see some compression due to seasonally weak quarter. Due to the banks exposure to troubled sectors like infrastructure (power), textiles, iron and steel and metals being higher, asset quality will be a key monitorable. We have estimated net profit to grow by 17.3% YoY to Rs 19.6bn. Treasury performance is expected to be weaker as the bank has over 30% of investments in AFS.

Axis Bank (Rs mn) Q1FY16 Q1FY15 %YoY

Q4FY15 %QoQ

FY15 FY16E FY17E Change Change Net Interest Income 38574.9 33104.9 16.5 37992.4 1.5 142241.4 168125.2 200312.5 Non Interest Income 20599.3 16910.5 21.8 26873.1 -23.3 83650.4 98624.4 114396.4 Operating Profit 34980.8 28956.6 20.8 40128.8 -12.8 133854.4 158666.6 188193.3 Net Profit 19550.1 16667.6 17.3 21805.9 -10.3 73578.2 88493.3 105679.6 Advances 2782722.0 2305351.6 20.7 2810830.3 -1.0 2810830.3 3373586.6 4119639.4 Deposits 3192175.2 2720042.3 17.4 3224419.4 -1.0 3224419.4 3813522.0 4579440.6

Allahabad Bank CMP Rs 93, Rating Accumulate, FY17E Target Rs 115 Loans and Deposits are estimated to grow by 6.8% YoY and 4.5% YoY respectively. NIM is expected to see some compression due to asset quality problem. Net profit is expected to increase by 39.1% YoY to Rs 1.6bn on account of high base effect of last year. Allahabad Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15

%QoQ FY15 FY16E FY17E Change Change

Net Interest Income 15138.3 16096.6 -6.0 14568.5 3.9 61778.8 68406.4 80828.1 Non Interest Income 5375.7 4689.4 14.6 5658.6 -5.0 19960.1 23560.2 27226.6 Operating Profit 11388.7 12195.3 -6.6 10087.9 12.9 44597.1 50708.2 60901.4 Net Profit 1568.4 1127.2 39.1 2026.3 -22.6 6209.0 9305.4 14193.0 Advances 1483780.7 1389610.0 6.8 1498768.4 -1.0 1498768.4 1716555.7 1989827.5 Deposits 1914898.1 1832700.0 4.5 1934240.5 -1.0 1934240.5 2138855.8 2460058.9


Quantum Securities

Bank of Baroda CMP Rs 156, Rating Buy, FY17E Target Rs 230 Loans and Deposits are estimated to grow by 8.8% YoY and 8.6% YoY respectively. NIM is estimated to remain stable on a sequential basis. Asset quality is expected to be under stress. Net profit is expected to decline by 37.8% YoY to Rs 8.5bn. Bank of Baroda (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 33556.4 33283.1 0.8 31716.7 5.8 131872.3 152034.0 188817.5 Non Interest Income 11011.4 10245.4 7.5 12954.6 -15.0 44020.0 50368.3 59036.9 Operating Profit 27635.8 24796.0 11.5 26935.3 2.6 99151.0 113996.4 145867.3 Net Profit 8474.3 13618.8 -37.8 5983.5 41.6 33984.3 42531.8 57697.9 Advances 4152231.9 3817720.0 8.8 4280651.4 -3.0 4280651.4 4879942.6 5709532.8 Deposits 5990327.3 5516490.0 8.6 6175595.2 -3.0 6175595.2 7040178.5 8237008.9

Bank of India CMP Rs 183, Rating Buy, FY17E Target Rs 265 Advances are expected to grow by 5.8% YoY. NIM is expected to decline on QoQ basis due to lower credit growth and asset quality problem. Slippages are expected to be at Rs 50bn in Q1FY16 as against Rs 82bn in Q4FY15. Net profit is estimated to decline by 87.3% YoY to Rs 1bn. Treasury performance is expected to be weaker as the bank has 20% of investments in AFS and high AFS duration at 4.3. Bank of India (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 27700.3 26864.9 3.1 28462.9 -2.7 113436.6 132027.4 157908.5 Non Interest Income 12343.7 10244.7 20.5 11221.5 10.0 42327.0 48676.1 55977.5 Operating Profit 17167.0 20603.0 -16.7 14265.5 20.3 74877.7 87684.7 106914.3 Net Profit 1024.6 8056.9 -87.3 -561.4 N.A 17089.2 19738.1 24144.8 Advances 3980052.9 3760157.7 5.8 4020255.5 -1.0 4020255.5 4542888.7 5269750.9 Deposits 5265875.6 5008754.9 5.1 5319066.3 -1.0 5319066.3 6063735.6 7033933.3

Canara Bank CMP Rs 298, Rating Buy, FY17E Target Rs 520 Advances are expected to grow by 9.5% YoY. NIM is expected to be stable on QoQ basis. Slippages are expected to remain high at Rs 28bn in Q1FY16. Net profit is expected to decline by 20% YoY to Rs 6.5bn. By September 2015, Rs 150bn restructured assets are expected to be out of restructuring. As a result the performance of these assets will be a key monitorable. Canara Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 25301.9 24292.6 4.2 24861.4 1.8 96636.7 113979.8 136678.5 Non Interest Income 12595.2 10269.0 22.7 13258.1 -5.0 45502.5 53268.1 61331.9 Operating Profit 18245.7 17950.0 1.6 17325.3 5.3 69503.7 82851.2 100172.5 Net Profit 6458.4 8068.6 -20.0 6129.6 5.4 27026.3 32513.2 43120.3 Advances 3316856.9 3029640.6 9.5 3300355.1 0.5 3300355.1 3762404.8 4402013.6 Deposits 4762093.0 4289761.6 11.0 4738401.0 0.5 4738401.0 5413787.4 6319899.0

Federal Bank Ltd CMP Rs 78, Rating Accumulate, FY17E Target Rs 90 Credit and Deposits growth rate are expected to be 17.4% YoY and 18% YoY respectively. NIM is estimated to decline on QoQ basis. Asset quality is expected to see some improvement, as corporate slippages are expected to have stabilized. Net profit is estimated to grow by 14.2% YoY to Rs 2.5bn. Federal Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 6059.0 5642.2 7.4 6232.3 -2.8 23804.1 27538.9 32626.1 Non Interest Income 2435.7 1565.4 55.6 3060.0 -20.4 8783.1 10928.9 12927.6 Operating Profit 4066.1 3515.3 15.7 4691.5 -13.3 16277.9 19605.1 23479.5 Net Profit 2515.9 2202.3 14.2 2805.3 -10.3 10057.5 12263.6 14723.6 Advances 528235.4 450120.0 17.4 512849.9 3.0 512849.9 613340.1 739518.7 Deposits 729497.4 618150.0 18.0 708249.9 3.0 708249.9 846608.0 1018156.8


Quantum Securities

Indian Bank Ltd CMP Rs 138, Rating Buy, FY17E Target Rs 285 Credit and Deposits growth rate are expected to be 3.8% YoY and 5.7% YoY respectively. NIM is estimated to decline on a QoQ basis. Overall asset quality will be under some stress due to some restructured assets completing moratorium slipping into NPA. Net profit is estimated to decline by 3.3% YoY to Rs 2bn. Indian Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 11019.4 10719.7 2.8 11079.4 -0.5 44612.9 50057.7 60920.0 Non Interest Income 3268.4 2152.4 51.9 4541.2 -28.0 13633.6 15876.1 18257.5 Operating Profit 7430.0 6370.0 16.6 8172.5 -9.1 30137.2 34881.8 43787.8 Net Profit 2003.8 2071.6 -3.3 2061.6 -2.8 10051.7 15005.5 21572.4 Advances 1220894.9 1176530.0 3.8 1258654.6 -3.0 1258654.6 1449593.9 1681615.5 Deposits 1641485.1 1553360.0 5.7 1692252.7 -3.0 1692252.7 1949842.2 2265100.7

Oriental Bank of Commerce CMP Rs 186, Rating Buy, FY17E Target Rs 300 Loans and Deposits growth is expected to be lower at 4.8% YoY and 7.2% YoY respectively. NIM is estimated to decline due to weak credit growth and asset quality problem. Due to the bank having higher exposure to troubled sectors like aviation, power & electricity (SEBs), other infrastructure and real estate, some slippages can be expected from these segments. Net profit is expected to decline by 79.9% YoY to Rs 731.2mn in Q1FY16. Oriental Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 12348.6 12427.5 -0.6 12976.9 -4.8 50842.0 58968.7 69424.6 Non Interest Income 5231.6 5882.0 -11.1 6285.3 -16.8 21214.0 24670.9 28461.2 Operating Profit 10266.8 11417.2 -10.1 12156.6 -15.5 42270.7 49474.3 58488.5 Net Profit 731.2 3645.4 -79.9 (1784.4) -141.0 4970.8 7398.9 11439.5 Advances 1448981.5 1383140.0 4.8 1452613.0 -0.2 1452613.0 1626298.3 1871845.7 Deposits 1999295.1 1865470.0 7.2 2040097.0 -2.0 2040097.0 2287847.9 2613351.3

Punjab National Bank CMP Rs 145, Rating Buy, FY17E Target Rs 195 Loans and Deposits growth is expected to be at 8.4% YoY and 11.6% YoY respectively. NIM is estimated to see some improvement on QoQ basis. Asset quality will be a key monitorable due to pressure being faced with respect to exposures to troubled sectors like infrastructure, power and steel. Net profit is estimated to decline by 67.6% YoY to Rs 4.6bn. Punjab National Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 41359.0 43797.0 -5.6 37915.8 9.1 165555.7 185803.4 213935.9 Non Interest Income 15355.2 12364.4 24.2 18051.3 -14.9 58907.3 67914.6 76167.8 Operating Profit 30996.1 31253.0 -0.8 32026.9 -3.2 119547.5 137383.7 159604.9 Net Profit 4551.2 14051.2 -67.6 3065.6 48.5 30615.8 38599.3 47473.7 Advances 3767290.7 3474852.8 8.4 3805344.1 -1.0 3805344.1 4344231.5 5107124.0 Deposits 4963648.5 4449201.4 11.6 5013786.4 -1.0 5013786.4 5744265.4 6732740.8

Vijaya Bank CMP Rs 41, Rating Buy, FY17E Target Rs 55 Loans and Deposits growth is expected to be at 9.1% YoY and 4.3% YoY respectively. NIM is estimated to show some improvement on a sequential basis due to improvement in the C/D ratio. Asset quality will be a key monitorable. Net profit is estimated to decline by 51.4% YoY to Rs 785.3mn.


Quantum Securities Vijaya Bank (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 6422.7 5354.8 19.9 6233.0 3.0 22922.8 27565.8 32915.0 Non Interest Income 2409.9 1662.0 45.0 2738.5 -12.0 8789.6 10395.8 12202.8 Operating Profit 2824.4 2900.5 -2.6 3123.5 -9.6 12590.3 16138.8 20175.9 Net Profit 785.3 1614.6 -51.4 968.0 -18.9 4394.1 6156.7 8791.5 Advances 840949.8 770910.0 9.1 866958.6 -3.0 866958.6 986462.0 1144587.5 Deposits 1238164.8 1186770.0 4.3 1263433.5 -2.0 1263433.5 1432873.1 1651098.5

Bajaj Finance Ltd CMP Rs 5103, Rating Hold, FY17E Target Rs 5500 Loans and Borrowings growth is estimated to be strong at 27.8% YoY and 24.9% YoY respectively due to Q1FY16 being a peak season for consumer durables. However, disbursements in the auto segment are expected to decline on a YoY basis. NIM is estimated to show improvement on sequential basis due to subvention income on consumer durables being booked upfront. Asset quality will be a key monitorable in the auto, construction equipment and infrastructure finance segments. Net profit is estimated to grow by 18.3% YoY to Rs 2.5bn. Bajaj Finance (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 9086.4 7439.7 22.1 8176.2 11.1 26518.4 34281.7 42636.0 Other Income 50.0 23.5 112.8 156.2 -68.0 5180.9 6217.1 7460.5 Operating Profit 4968.3 4035.2 23.1 4583.1 8.4 17415.0 22115.7 27603.0 Net Profit 2500.7 2113.6 18.3 2309.8 8.3 8978.7 10838.5 13562.1 Advances 327589.5 256420.0 27.8 311990.0 5.0 311994.5 391347.1 490103.4 Borrowings 264825.0 212100.0 24.9 247500.0 7.0 247500.0 310065.0 388371.3

Can Fin Homes Ltd CMP Rs 771, Rating Hold, FY17E Target Rs 850 Loans and Borrowings growth is expected to be at 40% YoY and 38.5% YoY respectively. NIM is expected to improve on a sequential basis due to decline in funding costs. Asset quality is expected to remain comfortable. Net profit is expected to grow by 24% YoY to Rs 235.1mn. Can Fin Homes (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 629.9 423.9 48.6 592.6 6.3 1774.1 2544.0 3355.2 Operating Profit 438.3 311.0 40.9 432.9 1.2 1494.5 2185.2 2927.1 Net Profit 235.1 189.6 24.0 228.9 2.7 862.4 1308.9 1768.7 Advances 88959.6 63546.0 40.0 82370.0 8.0 82370.0 111459.5 148839.1 Borrowings 79650.0 57509.2 38.5 73750.0 8.0 73750.0 100890.0 136891.1

Cholamandalam Investment and Finance Ltd CMP Rs 696, Rating Hold, FY17E Target Rs 735 Loans and Borrowings growth is expected to be at 9.6% YoY and 5.1% YoY respectively. Growth in most auto segments except tractors is expected to remain weak. NIM is expected to improve on a sequential basis due to decline in funding costs. Asset quality is expected to show some stress due to weak industry scenario and recent shift to 150 day provisioning. Net profit is expected to grow by 37.1% YoY to Rs 1.3bn. Cholamandalam (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 4680.4 3843.9 21.8 4497.6 4.1 13972.9 17677.0 21481.9 Other Income 43.2 93.0 -53.5 21.3 102.8 3335.1 3957.0 4711.6 Operating Profit 2720.3 2215.9 22.8 2614.9 4.0 9819.4 13456.0 17280.3 Net Profit 1276.3 931.0 37.1 1356.4 -5.9 4351.6 6000.9 8328.1 Advances 262160.8 239107.0 9.6 254525.0 3.0 221835.4 264858.7 319370.3 Borrowings 200594.6 190853.0 5.1 194752.0 3.0 194752.0 232497.0 278884.4


Quantum Securities

GIC Housing Finance Ltd CMP Rs 220, Rating Buy, FY17E Target Rs 280 Loans and Borrowings growth is expected to be at 21.9% YoY and 22.2% YoY respectively. NIM is expected to decline on a sequential basis. Asset quality is expected to remain comfortable. Net profit is expected to grow by 9% YoY to Rs 276.3mn. GIC Housing (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 596.4 517.8 15.2 626.7 -4.8 1702.3 2154.3 2619.6 Operating Profit 433.7 412.4 5.2 426.7 1.7 1659.8 2151.3 2644.7 Net Profit 276.3 253.6 9.0 266.6 3.6 1029.6 1263.9 1556.7 Advances 67299.0 55217.9 21.9 65979.4 2.0 65979.4 79851.4 96789.4 Borrowings 59098.8 48343.3 22.2 57940.0 2.0 57940.0 70588.8 86116.4

IDFC Ltd CMP Rs 156, Rating Buy, FY17E Target Rs 210 Loans are expected to decline by 1.8% YoY as sanctions in the infrastructure sector still remain weak and as the company is in the process of transforming itself into a bank. NIM is estimated to decline on YoY basis as the company is replacing some of its medium term borrowings to long term borrowings in order to be able to meet the banking norms. Asset quality will be a key monitorable especially in case of loans given to the power segment. Net profit is estimated to decline by 10.5% YoY to Rs 4.3bn. IDFC Consolidated (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 6994.5 6820.0 2.6 6420.0 8.9 26330.0 28427.0 31123.6 Non Interest Income 2650.0 2038.8 30.0 4565.6 -42.0 14317.2 17221.5 20741.4 Operating Profit 7658.7 8320.8 -8.0 8399.9 -8.8 33595.2 37141.5 41894.4 Net Profit 4312.9 4817.4 -10.5 3822.1 12.8 17069.5 18360.3 21582.1 Infrastructure Loans 513784.6 523000.0 -1.8 524270.0 -2.0 524270.0 576697.0 674735.5 Borrowings 649269.6 568140.0 14.3 662520.0 -2.0 662520.0 761898.0 899039.6

Indiabulls Housing Finance Ltd CMP Rs 633, Rating Accumulate, FY17E Target Rs 735 Loans and Borrowings growth is expected to be at 26.8% YoY and 31.7% YoY respectively. NIM is estimated to be stable on a sequential basis. Asset quality also is expected to remain stable on a sequential basis. Net profit is estimated to grow by 14.3% YoY to Rs 4.7bn. Indiabulls Housing (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 6645.0 4046.3 64.2 6511.0 2.1 20897.0 25704.0 31569.9 Other Income 2298.2 2279.5 0.8 2321.4 -1.0 12241.5 15301.9 19127.3 Operating Profit 8113.4 5819.4 39.4 8669.9 -6.4 28445.6 35318.3 43682.9 Net Profit 4710.4 4122.1 14.3 5269.3 -10.6 19782.3 24186.9 29600.9 Advances 532797.0 420140.0 26.8 522350.0 2.0 442171.0 557400.8 682349.8 Borrowings 498613.5 378640.0 31.7 474870.0 5.0 474870.0 590784.9 729317.9

LIC Housing Finance Ltd CMP Rs 462, Rating Buy, FY17E Target Rs 585 Loans and Borrowings growth is expected to be at 18.7% YoY and 17.6% YoY respectively. NIM is expected to see some decline on a QoQ basis due to lean season. Asset quality is expected to remain comfortable with no big ticket NPAs expected to be added during Q1FY16. Net profit is estimated to grow by 13% YoY to Rs 3.6bn.


Quantum Securities LIC Housing (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 6314.2 5062.3 24.7 6498.2 -2.8 22364.3 27919.9 36107.5 Other Income 278.2 344.6 -19.3 281.0 -1.0 2519.8 2829.8 3192.1 Operating Profit 5838.2 4973.2 17.4 5856.1 -0.3 21091.9 26115.4 33489.2 Net Profit 3640.9 3223.1 13.0 3781.8 -3.7 13861.9 17530.8 22042.0 Advances 1110697.5 936094.5 18.7 1083607.3 2.5 1083607.3 1303819.0 1586964.7 Borrowings 975124.7 828890.0 17.6 965470.0 1.0 965470.0 1150840.2 1383311.9

Power Finance Corporation Ltd CMP - Rs 262, Rating Buy, FY17E Target Rs 390 Loan growth is expected to remain healthy at 14.8% YoY. NIM is expected to be stable on QoQ basis and asset quality will be a key monitorable. Net profit is estimated to grow by 10.1% YoY to Rs 15.9bn.

PFC (Rs mn) Q1FY16 Q1FY15 %YoY

Q4FY15 %QoQ

FY15 FY16E FY17E Change Change Net Interest Income 24467.6 21913.0 11.7 24424.7 0.2 97036.1 111850.2 131654.6 Other Income 799.2 699.0 14.3 714.9 11.8 788.0 906.2 1087.4 Operating Profit 24713.1 22070.3 12.0 24898.4 -0.7 95652.3 110259.4 129831.8 Net Profit 15943.0 14482.6 10.1 15607.6 2.1 59593.3 71240.1 84856.3 Advances 2240414.8 1951910.0 14.8 2175160.0 3.0 2175160.0 2505053.4 2987836.0 Borrowings 1915284.6 1640810.0 16.7 1877730.0 2.0 1877730.0 2182537.1 2596303.2

Rural Electrification Corporation Ltd CMP Rs 285, Rating Buy, FY17E Target Rs 455 Loan growth is estimated to remain at 20.4% YoY. NIM and asset quality are expected to remain stable on sequential basis. Net profit is estimated to grow by 6.7% YoY to Rs 13.7bn.

REC (Rs mn) Q1FY16 Q1FY15 %YoY

Q4FY15 %QoQ

FY15 FY16E FY17E Change Change Net Interest Income 22570.8 18958.1 19.1 22002.8 2.6 82274.7 97803.3 116660.3 Other Income 798.3 586.0 36.2 775.0 3.0 3159.7 3633.7 4360.4 Operating Profit 21956.5 18960.7 15.8 21321.2 3.0 82300.0 97749.8 116648.9 Net Profit 13684.7 12827.9 6.7 10965.0 24.8 52598.7 60889.2 72706.4 Advances 1868328.8 1552340.0 20.4 1796470.0 4.0 1796470.0 2130444.5 2564325.8 Borrowings 1555547.2 1307470.0 19.0 1510240.0 3.0 1510240.0 1784170.1 2138279.6

Shriram City Union Finance Ltd CMP Rs 1688, Rating Buy, FY17E Target Rs 2365 Loan growth is estimated to remain at 13.5% YoY. NIM is estimated to remain stable on a sequential basis. Asset quality is expected to see some stress in the auto and SME segments and also due to recent shift in provisioning to 150 DPD. Net profit is estimated to grow by 5% YoY to Rs 1.3bn. Shriram City (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 5584.4 5001.2 11.7 5617.1 -0.6 20685.9 24756.5 29519.9 Other Income 150.0 126.2 18.9 92.1 62.9 1198.9 1492.6 1855.6 Operating Profit 3280.6 3104.9 5.7 3313.3 -1.0 12948.9 16225.4 19914.8 Net Profit 1341.2 1277.2 5.0 1496.0 -10.3 5580.6 6736.8 8345.1 Advances 170513.4 150280.0 13.5 167170.0 2.0 158902.9 189112.7 227695.0 Borrowings 121539.6 118090.0 2.9 124020.0 -2.0 124020.0 145227.4 175029.4

Sundaram Finance Ltd CMP Rs 1565, Rating Hold, FY17E Target Rs 1600 Loans and Borrowings growth is expected to remain low at 9% YoY and 5.7% YoY respectively. NIM is estimated to be stable on a sequential basis. Asset quality will be a key monitorable, especially in case of loans given to the CV segment. Net profit is estimated to decrease by 10.5% YoY to Rs 1.1bn.


Quantum Securities Sundaram Finance (Rs mn) Q1FY16 Q1FY15

%YoY Q4FY15


Net Interest Income 2806.7 2640.7 6.3 2758.2 1.8 10870.9 12331.7 14109.5 Other Income 256.3 380.1 -32.6 102.5 150.0 1144.1 1321.2 1526.8 Operating Profit 1924.1 1911.2 0.7 1710.6 12.5 7487.1 8566.1 9912.3 Net Profit 1094.2 1222.4 -10.5 906.8 20.7 4541.4 5207.1 6021.5 Advances 143430.6 131528.8 9.0 139253.0 3.0 139253.0 155963.3 179357.8 Borrowings 136558.2 129240.9 5.7 132580.8 3.0 132580.8 147164.7 169239.4

Credit Analysis and Research Ltd CMP Rs 1450, Rating Accumulate, FY17E Target Rs 1750 Income from operations is expected to grow by 12.2% YoY, which will be mostly on account of income from fresh ratings, as surveillance income normally is better in Q2 and Q3 of any fiscal year. Operating profit is expected to grow by 17.6% YoY. Net profit is estimated to dec line by 8.8% YoY to Rs 242.3mn due to high base of other income last year.

CARE (Rs mn) Q1FY16 Q1FY15 %YoY

Q4FY15 %QoQ

FY15 FY16E FY17E Change Change Income from Operations 478.7 426.8 12.2 778.5 -38.5 2572.1 3031.6 3642.7 Operating Profit 236.2 200.9 17.6 520.0 -54.6 1620.7 1885.5 2225.4 Other Income 88.0 148.4 -40.7 32.0 175.0 435.6 522.7 653.4 Net Profit 242.3 265.8 -8.8 350.9 -30.9 1403.3 1666.7 2005.8

Analyst: Rati J. Pandit, CFA +91-22-40287021 Email: [email protected] Date: July 13, 2015 Disclaimer: Quantum Securities Pvt. Ltd. (QSPL) offers discount and full service brokerage services and is not involved in any investment banking or merchant banking activities. This document is based on information obtained from sources believed to be reliable and due diligence has been conducted to that effect. We do not have any other material conflict of interest at the time of publication of the research report. Opinions & theories expressed are based on present circumstances & judgment and are subject to change without notice. Quantum Securities Pvt. Ltd. accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. If annualized returns are greater than 15% , then the stock is rated as BUY, between a range of 10-15% is rated as Accumulate. If annualized returns are lower than -15%, then the stock is rated as SELL and between a range of -10% to -15% is rated as Reduce. In the range of +/ (-) 10%, the stock is rated as Hold. However, within this zone we may choose to give an Accumulate, Reduce or Hold rating. Quantum Securities Pvt. Ltd. does not have any financial interest in the subject company and has not been engaged in market making activity for the subject company; QSPL or any of its associates have not received any compensation or other benefits from the subject company or third party in connection with the research report or any other compensation from the subject company in the past twelve months. Further, Rati J. Pandit, CFA has not served as an officer, director or employee of the subject company; QSPL does not have actual/beneficial ownership of one per cent or more of securities of the subject company, at the end of the month immediately preceding the date of publication of the research report.

qs - bfsi - q1fy16 preview

Documents