HSIL Ltd. – Q1FY12 Result Update

HSIL announced its Q1FY12 results and reported a very strong performance. Its revenues increased to INR 3280 mn, an increase of 41.5% as compared to Q1FY11. The EBITDA posted by the company was INR 627 mn, an increase of 55.5% YoY. EBIDTA margins increased by 180 basis points to 20.4%

The Profit before Tax (PBT) increased to INR 417 mn, a rise of 130% as compared to the first quarter of the previous financial year. The Profit after Tax (PAT) showed a robust growth of 111% to INR 285 mn. The PAT margins increased substantially by 309 basis points to 9.36% Cash profits showed strong growth of 32% to INR 410 mn.

Outlook and Valuations

At current market price of INR 219, the stock is trading at a P/E of 10.5x for FY12 estimated earnings. Looking at the robust performance by the company in the first quarter and given the expansion plans in place and management capabilities to drive the business, we re-rate and recommend a “BUY” on the stock with a price target of INR265.

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YES Bank - Q1FY12 Result Update

Following are some highlights of the first quarter result of Yes Bank

Ø  YES Bank (YES) delivered another strong quarter, with net profits increasing by 38.2% to INR 2163 Mn on YoY basis. This was contributed by higher net interest income (NII) of INR 3.5 bn (35% YoY) & non interest income grew by 15% to INR 1.65 Bn on YoY basis. Growth in the non interest income was led by transaction banking (INR 420 Mn), financial advisory (INR 829 Mn), financial markets (INR 247 Mn) and branch banking fees & others (INR 157 Mn).

Ø  The major highlights were deposits registered a healthy growth of 44.1% along with advances growing by 26.1% on YoY basis. Current and Savings Account (CASA) deposits grew by 49.8% to INR 47.64 bn taking the CASA ratio to 10.9% Q1FY12 from 10.3% in Q4FY11.

Outlook & Valuation

YES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionally the bank is expanding ~125 branches every year, which would help to improve its CASA ratio to 15% in FY12E. We remain positive on long term prospects of the bank. At the CMP stock trades at 1.9x of its FY12E Book Value. 

We maintain BUY rating on the stock for target price of INR 420.

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Q1FY12 Result of IndusInd Bank

 Few Highlights

Ø  Indusind Bank (IIB) net profit grew by 52% YoY to INR 1802 Mn mainly driven by robust core fee income growth of 44% YoY. The proportion of core fee income increased due to increase in its third party products, trade and remittances, foreign exchange and Investment banking income. IIB’s net interest income has grown by 32% to INR 3900 Mn as compared to INR 2957 Mn in Q1FY11 & other income increased by 34% YoY to INR 2154 Mn.

Ø  Advances grew 31.3% YoY to INR 283.8 Bn & deposits grew by 28.7% to INR 352.6 Bn. This was stronger than the industry’s growth rate of ~20% & ~17% respectively. Improvement in deposit mix along with branch expansion (326 from 224 branches) led to higher CASA ratio of 28.2% in Q1FY12 (24.3% in Q1FY11). Reported NIM improved 9 bps YoY to 3.41%, however, on sequential basis it declined 9 bps due to sharp rise in the cost of deposits (68 bps QoQ) while yield on advances increased by 68 bps.

Ø  IIB continued to improve its asset quality and has brought down the net NPA level to 0.3% in Q1FY12 from 0.38% in Q1FY11. Gross NPA ratio fell to 1.08% in Q1FY12 from 1.26% in Q1FY11, but it increased sequentially by 7 bps and 2 bps. The NPA coverage ratio rose 288 bps YoY to 72.9%. Also the IIB maintained a healthy capital adequacy ratio (CAR) of 14.99% in Q1FY12 as against 13.71% in Q1FY11. The strong traction in CAR is likely to sustain IIB’s growth momentum in coming quarters.

Outlook & Valuation

Going forward IIB in next 3 years is planning to keep NIMs above 3.5% along with healthy bottom-line, this would be possible through 1. scaling up CASA ratio to 35% with 200 bps to 300 bps improvement every year. 2. Bank plans to take the branch network to 550 by Mar ’13. 3.  Bank is expected to expand its product suite and services to achieve higher business growth. At the CMP, stock trades at 3x FY12E BV, we have Accumulate rating on the stock with target price of INR 320.

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Tecpro Systems Ltd - Stock Idea

Tecpro Systems Ltd. (TSL) is an established material handling company with presence in the coal handling (19% market share) and ash handling (15% market share) for power, steel, cement and other sectors. TSL has recently forayed into BoP segment and has secured two orders worth INR 29.7bn (68% of its current order-book). We believe TSL would be key beneficiary, given its leadership position in material / ash handling business and strong growth in underlying industry. With revenue and profit expected to grow at CAGR of 25% and 18% respectively over FY13, recommend Buy on the stock for price target of INR 300 (+25%).

Investment Rationale

Ø  Strong positive outlook for core infrastructure industry, directly linked, augurs well for the business prospects of TSL

Ø  Established player (executed highest orders for coal handling during eleventh five year plan) in ash and material handling segment and foray into BoP segment (synchronization and diversification) would lead to growth with diversification

Ø  Having secured orders in Waste heat recovery (WHR) from Cement Industry, order intake momentum in this segment is likely continue

Ø  Strong technical expertise (in-house and through collaborations) enables TSL to offer its product and services on turnkey basis within a stipulated time at competitive rates

Ø  Clientele with strong base mitigates risk of project deferment or cancellation

Ø  Revenue visibility over FY13e on the back of strong order-book of INR 43.7bn (2.2x FY11 sales)

Outlook & Valuation

At the CMP, TSL trades at 6.6x our FY13e earnings estimate, EV/Sales of 0.4x and EV/EBITDA of 3.4x (FY13e). We expect company to generate RoE of 22.1% in FY13e . Given 18% CAGR growth of its net profit over FY13 and RoCE of 27%, we set price objective of INR 300 (exit PE of 8x its FY13e earning per share of INR 37.7).

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