Buy stocks of LIC Housing; tgt of Rs 285

“LIC Housing Finance, Net Interest Income (NII) registered a decline during the quarter by 11.8% YoY from Rs4203.5 mn in Q4FY11 to Rs3707.7 mn in the current quarter on the back of lower NIMs (decline of ~101 bps on YoY basis). However on QoQ basis margins improved by 17 bps resulting in 13.8% jump in NII. The decline in NIMs on YoY basis was on the back of higher cost of funds and slower disbursement growth in high yielding developer loan portfolio. However, sequentially NCD issue in January and preferential capital allotment to LIC has brought down the overall cost of funds resulting in higher NIMs. The management expects NIMs to improve going forward in FY13 (guidance of 2.7-3.0% in FY13) led by higher disbursement in developers portfolio (target of 10% of the total loan portfolio currently at 5.0%) coupled with repricing of fixed rate loans (Fix-o-Floaty). The company's teaser rate home loan portfolio under Fixed-o-Floaty scheme worth Rs120 bn would get re-priced in the current fiscal.”

“Sharp decline in NIMs and subdued growth other income has resulted in 19.4% decline in Net Profit during Q4FY12 despite provision write back of Rs23.9 mn in the current quarter. Sequentially net profit registered a decline of 17.0% despite higher NIMs mainly on the back of higher write back of provision in Q3FY12 (Rs796.9 mn as against Rs23.9 mn in the current quarter). Last quarter, the company has aligned its provisioning policy on Standard Assets / NPA to match with revised NHB norms and consequently the company has reversed the excess provision of Rs788.9 mn (net of provisioning required to be made in the last quarter). Outstanding Mortgage Portfolio as on Q4FY12 was Rs630.8 bn as against Rs510.9 bn as on Q4FY11, registering a YoY growth of 23.5% (7.4% QoQ). Total loan disbursements registered a growth of 19.3% (40.2% QoQ) during the quarter mainly led by robust disbursement in the individual’s loan portfolio (growth of 22.0% YoY, 38.9% QoQ). Loan disbursements to developers were Rs2.74 bn as against Rs3.33 bn YoY. Lower disbursal in the developer’s portfolio has consequently lowered the proportion of the developer loan portfolio to ~5.0%. The company is targeting a corporate developer loan book at 10% over next 1-2 year. Going ahead, we expect loan book CAGR of 21.9% over FY12-14E.”

“We believe the margins to rebound going forward on the back of repricing of fixed rate loans and higher disbursements to high yielding developers portfolio. We expect margins to improve by 22 bps in FY13E. Added to this release of provisions on teaser portfolio (that will come for repricing) is likely to keep the provisioning expenses low going forward. With stable asset quality we estimate LICHF to report an EPS CAGR of 35.1% over FY12-FY14E. ABV is estimated to grow at 19.0% CAGR during the same period. Going forward, we expect the company to deliver healthy net interest income growth (CAGR 29.2% FY12-14E) and earnings growth (CAGR 35.1% FY12-14E). We have slightly increased our target price to Rs285.1 from Rs266.6 earlier, giving an upside potential of 14.1% from current levels, thus changing the rating from Neutral to Accumulate,” says Aditya Birla Money research report.

Buy stocks of Bank of India; target of Rs 376

“BANK OF INDIA (BOI) has reported a huge 93% YoY jump in its fourth quarter (Jan-March) net profit at Rs 953 crore, driven by higher interest income and lower operating expenses. Net Interest Income (NII) rose 21% sequentially to Rs 2,501 crore in Q4FY12. However, net profit increased at a slower pace by 7.6% to Rs 2,678 crore for fiscal year ending March 31, 2012. The bank's global loan book expanded more than 16% to Rs 2.49 lakh crore, while deposits grew at a muted pace nearly 6.5% to 3.18 lakh crore.”

“The bank's capital adequacy ratio stood at 11.59% as against 12.17% a year back with Tier I capital at 8.59% and Tier II capital at 3.36%. During the year, the bank has allotted 2.73 cr equity shares to Life Insurance Corporation (LIC) via a preferential allotment, raising Rs 1,037 cr. The capital infusion in BOI is part of the drive of the government to recapitalise the public sector banks. Going forward, BOI will need more capital infusion in order to meet their capital adequacy norms according to Basel III norms and also for increasing their lending activities. Since the Bank is just near the cushion of current Basel III Capital Adequacy norm.”

“Bank of India reported a healthy growth for Q4FY2012. The bank`s balance sheet growth was healthy during FY2012. However management is confident that the asset quality of the bank continues to be robust. Higher cash recovery and improvement in global NIM was a positive surprise. We have raised our estimates by 7% for FY12‐13. We expect RoA to be 0.7% in FY12 and improve to 0.8% in FY13, and RoE to be 15% in FY12 and 17% in FY13. At CMP of Rs 350, the stock is trading at valuation of PE of 5.99x of FY13E EPS and at an adjusted P/BV of 0.98x FY13E BV. We have valued the Bank at P/BV of 1.05x FY13E & maintain our BUY rating on the stock with a revised target price Rs 376 with an upside potential of 7% from current levels,” says Magnum research report.

Buy stocks of Karur Vysya Bank; target of Rs 460

“Karur Vysya Bank, net profit for FY2011-12 was at Rs. 501.7 crore as compared to Rs. 415.6 crore for FY2010-11, a growth of 20.72% over the previous year. Operating Profit for FY2011-12 increased to Rs. 725.7 crore as against Rs. 600.6 crore for FY2010-11.”

“Total Income of the bank stood at Rs. 3,620.52 crore for the period ended 31st March 2012 as against Rs. 2,482.03 crore during the previous year, clocking a remarkable growth of 45.87%. Net Interest Income (NII) for the year ended 31st March 2012 grew by 19.59% to Rs. 917.12 crore as against Rs. 766.85 crore year ended 31st March 2011 on account of growth in advances & investments. The operating profit of the bank stood at Rs. 725.71 crore for year ended 31st March 2012 as against Rs. 600.58 crore for the corresponding period of previous fiscal, posting a robust growth of 20.83%. Net Profit was up 20.72% at Rs. 501.72 crore against Rs. 415.59 crore. Karur Vysya Bank has declared a dividend of Rs 14 a share (140%). Net Interest Margin fell marginally to 3.08% in FY12 as against 3.39% in the corresponding period of the previous year. Return on Average Assets of the bank stood at 1.56% as for the year ended 31st March 2012.”

“The bank recorded an increase of 31.66% in its business mix and the total business stood at Rs. 56,317 crore during the year, up from the 42,774 crore recorded during the previous year. Total deposits grew by 29.89% to Rs. 32,112 crore as at March 31, 2012 from Rs. 24,722 crore as at March 31, 2011. Gross advances grew by 34.08% on year on year basis to Rs. 24,205 crore from Rs. 18,052 crore mainly due to advance to NBFC’s sector like IL&FS (NBFC showed a jump of 112.27% in FY12). The Balance Sheet size grew by 33.34% on YoY basis to Rs. 37,636 crore from Rs. 28,225 crore.”

“Karur Vysya Bank has reported a good growth in FY12. Bank has set a target of business level to the tune of Rs. 72,000 crore with aiming to achieve Rs 41,000 crore of deposit and Rs 31,000 crore of Advances by March 2013. Management is confident for NIM to stay above 3% in near term but CASA will be a real challenge for the Bank. Business mix is going to benefit to the bank. Going forward, the major thrust will be focus on Corporate, SME and CASA. The bank has also set up a robust online platform for customers to transact without coming to the branch. These measures are expected to move the customers to alternate channels of delivery. The Bank has also increased the number of branches authorized to sell gold coins and/or silver bars. Further thrust is being given to improve its performance in selling third party products. At current price of Rs 419.00, the stock quotes at 1.5x and 1.3x adjusted Book Value (ABV) FY13 and FY14 respectively.”

“We expect Karur Vysya Bank to deliver robust growth in net earnings over FY12‐FY14. We have revised our FY13 and FY14 Estimates by 7% and 8% respectively. We recommend BUY rating on the stock with target price of Rs 460.00 (the stock will trade at 1.6x and 1.4x ABV FY13 and FY14 respectively) with an upside potential of 10% from current levels,” says Magnum research report.

Buy stocks of Infosys; target of Rs 2940

“We met Mr. Abraham Matthews (Head Finance, Infosys BPO) to understand the demand environment for both, BPO and Infosys. The management is confident of achieving guidance despite the cross-currency impact. Moreover, the currency benefit has given them a scope for wage hike. The increased likelihood of inorganic growth and low expectation gives the comfort for a “BUY” rating.”

“The management was confident of delivering growth stronger than overall growth of (8-10%), excluding ~US$30m contribution from the acquisition. BPO (FY12: US$384m, 5.5%) is seeing good traction from BFSI, Retail-CPG and Healthcare. Few deals involve rebadging of clients’ employees; hence, margin benefit due to currency depreciation would be lower-than-expected. Portland acquisition resulted in one up-selling opportunity. Due to cross-currency headwind, the performance in Q1FY13 will be in-line with the guidance. The management could calibrate guidance (by 0-1% downward) to adjust the crosscurrency movement. However, our discussion with the management didn’t hint for the same.”

“The currency movement has been supportive for margins despite headwind from cross-currency. The management is likely to give a wage hike, which was due in Q1FY13. But, the currency movement will give impetus to the margin. As highlighted (“Time to BUY” April 24, 2012), the consensus is overlooking margin levers; hence, expect 5-7% upgrade in EPS, post Q1FY13 result. Management cited urgency for inorganic route to build non-linear momentum. The size of acquisition is likely to be at US$100-200m. The management continues to maintain their back-ended growth commentary inline with global tech majors. The valuation comfort and low expectation leaves little room for a negative surprise; hence, retain “BUY”,” says Prabhudas Lilladher research report.

Buy stocks of HDFC Bank; target of Rs 606

“The Housing Development Finance Corporation Ltd. (HDFC) was amongst the first to receive an ‘in principle’ approval from the RBI to set up a bank in the private sector, as part of the RBI’s liberalisation of the Indian Banking Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of “HDFC Bank Ltd with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The bank has a network of 2,544 branches and 8,913 ATMs in 1,399 cities as on March 31, 2012.”

“HDFC Bank has announced the March quarter results which showed consistent all the way. The stand alone net interest income stood at Rs.73880.40 million from Rs 54685.50 million with a rise of 35.10%. The Net Profit for the quarter stood at Rs 14530.80 million from Rs 11147.10 million showing a rise of 30.35%. The total income is stood at Rs 88800.20 million from Rs 67243.10 million with a rise of 32.06%. The EPS of the bank is stood at Rs.6.19 for the quarter ended March 2012.”

“At the current market price of Rs 545, the stock is trading at 20.63 x FY13E and 17.81 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.26.42 and Rs.30.60 respectively. Net Income and PAT of the company are expected to grow at a CAGR of 25% and 22% over 2011 to 2014E respectively. Price to Book Value of the stock is expected to be at 3.54 x and 2.95 x respectively for FY13E and FY14E. 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 606 for medium to long term investment,” says Firstcall Research report.

Buy stocks of Tata Steel above Rs 425

"Tata Steel has come out from the recent consolidation and was facing resistance around Rs 418, because today it has crossed that level so there could be a possibility that some momentum can pick up. Even then I would look for the stock to cross above Rs 425 and if it sustains only above that I would be keen on buying that with a stoploss of Rs 410. Till that does not happen this breakout could be a failure, so we should not go aggressive at this point of time."

He further added, "In L&T people who are long can keep a trailing stop loss at Rs 1280. Now the stock has already run away. If we look at the overall chart there is a downward sloping trend line, which has resistance in the range of Rs 1,380 to Rs 1,400. So if people are already holding longs, they can keep trailing stop loss at Rs 1,280 but fresh longs should not be initiated at this level."