Lakshmi Finance and Industrial Corporation Ltd

Transcription

1 Q1FY12 Result Update Enhancing investment decisions CRISIL Limited. All Rights Reserved.

2 Explanation of CRISIL Fundamental and Valuation (CFV) matrix The CFV Matrix (CRISIL Fundamental and Valuation Matrix) addresses the two important analysis of an investment making process Analysis of Fundamentals (addressed through Fundamental Grade) and Analysis of Returns (Valuation Grade) The fundamental grade is assigned on a five-point scale from grade 5 (indicating Excellent fundamentals) to grade 1 (Poor fundamentals) The valuation grade is assigned on a five-point scale from grade 5 (indicating strong upside from the current market price (CMP)) to grade 1 (strong downside from the CMP). CRISIL Fundamental Grade Assessment CRISIL Valuation Grade Assessment 5/5 Excellent fundamentals 5/5 Strong upside (>25% from CMP) 4/5 Superior fundamentals 4/5 Upside (10-25% from CMP) 3/5 Good fundamentals 3/5 Align (+-10% from CMP) 2/5 Moderate fundamentals 2/5 Downside ( % from CMP) 1/5 Poor fundamentals 1/5 Strong downside (<-25% from CMP) Analyst Disclosure Each member of the team involved in the preparation of the grading report, hereby affirms that there exists no conflict of interest that can bias the grading recommendation of the company. Additional Disclosure This report has been sponsored by NSE - Investor Protection Fund Trust (NSEIPFT). Disclaimer: This Exchange-commissioned Report (Report) is based on data publicly available or from sources considered reliable by CRISIL (Data). However, CRISIL does not guarantee the accuracy, adequacy or completeness of the Data / Report and is not responsible for any errors or omissions or for the results obtained from the use of Data / Report. The Data / Report are subject to change without any prior notice. Opinions expressed herein are our current opinions as on the date of this Report. Nothing in this Report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The Report is not a recommendation to buy / sell or hold any securities of the Company. CRISIL especially states that it has no financial liability, whatsoever, to the subscribers / users of this Report. This Report is for the personal information only of the authorized recipient in India only. This Report should not be reproduced or redistributed or communicated directly or indirectly in any form to any other person especially outside India or published or copied in whole or in part, for any purpose. CRISIL Limited. All Rights Reserved.

3 A market-linked play Fundamental Grade Valuation Grade Industry 1/5 (Poor fundamentals) 5/5 (CMP has strong upside) Capital Markets Lakshmi Finance and Industrial s (Lakshmi Finance s) Q1FY12 results were in line with CRISIL Research s expectations, as the company booked lower profits on the investment portfolio. In the past month, equity markets have declined due to global uncertainties as well as macro concerns like high inflation, tight monetary policies. However, we expect the markets to bounce back from these levels and the current financial year to give a negative return of 10%. We continue to retain our fundamental grade of 1/5 as Lakshmi Finance s business model is not supported by professional research and, therefore, provides limited value to investors. We introduce earnings estimates for FY12. Q1FY12 result analysis Q1 revenues dropped 45.6% y-o-y (down 31% q-o-q) to Rs 5.2 mn primarily on account of lower booking of investment profits. Operating cost, excluding loss on sale of investments, came in at Rs 2.1 mn in Q1FY12. PAT fell by 57% y-o-y to Rs 3.6 mn following a contraction in total income as the majority of its costs remain fixed (employee costs, depreciation and other expenses). Net asset value (NAV) fell in line with the 16% decline in market. We assume the market will remain range bound around the current level and estimate NAV to be around Rs 91 per share by year-end. Valuations: Current market price has strong upside We continue to use the NAV method to value Lakshmi Finance. Based on the equity market performance of the portfolio till date and expected future performance for the year, we estimate fair value of Rs 58 per share after applying a liquidity discount of 30% to NAV and adjusting for portfolio expenses. Based on the current market price, our valuation grade is 5/5. KEY FORECAST (Rs mn) FY08 FY09 FY10 FY11# FY12E Total Income PAT EPS (Rs) EPS growth (%) nm Book value per share Book value growth (%) Dividend Yield (%) RoE (%) P/E (x) 2.7 nm nm P/BV (X) #FY11 numbers are based on abridged financials NM: Not meaningful; CMP: Current market price Source: Company, CRISIL Research estimate August 26, 11 Fair Value Rs 58 CMP Rs 34 CFV MATRIX KEY STOCK STATISTICS NIFTY 4840 NSE LAKSHMIFIN Face value (Rs per share) 10 Shares outstanding (mn) 3 Market cap (Rs mn)/(us$ mn) 102/ week range (Rs) (H/L) 80/27 Free float (%) 52.8 Avg daily volumes (30-days) 117 Avg daily value (30-days) (Rs mn) 0.0 SHAREHOLDING PATTERN 100% Excellent Fundamentals Fundamental Grade PERFORMANCE VIS-À-VIS MARKET Returns 1-m 3-m 6-m 12-m LAKSHMI FINANCE -9% 19% -% -41% NIFTY -9% -7% -1% -5% ANALYTICAL CONTACT Chetan Majithia (Head) Poor Fundamentals 90% 80% 70% 60% 50% 40% 30% % 10% 0% Strong Downside Valuation Grade 52.5% 52.5% 52.5% 52.6% 0.3% 0.3% 0.3% 0.3% 47.2% 47.1% 47.1% 47.1% Strong Upside Jun 10 Sep 10 Dec 10 Mar 11 Promoter DII Others chetanmajithia@crisil.com Vishal Rampuria Elizabeth John vrampuria@crisil.com ejohn@crisil.com Client servicing desk clientservicing@crisil.com CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 1

4 Q1FY12 Result Summary (Rs mn) Q1FY12 Q4FY11 Q1FY11 q-o-q (%) y-o-y (%) Total Income % -46% Employee Costs % 5% Other expenses % 18% Loss on sale of investments n.m n.m Depreciation % 53% Total Expenditure % 13% Operating Profit % -60% Other Income % -51% Interest charges % nm PBT % -59% Tax % n.m PAT % -57% No of equity shares (mn) % 0% EPS (Rs) % -57% Total income fell 46% y-o-y on lower booking of investment profits PAT down 57% y-o-y on contraction in income as most of its costs are fixed Source: Company, CRISIL Research Total income down 46% y-o-y and 31% q-o-q PAT down 57% y-o-y, up 438% q-o-q (Rs mn) (Rs mn) Sep-09 Dec-09 Mar-10 Jun-10 Sep-09 Dec-09 Mar-10 Jun-10 Source: Company, CRISIL Research Source: Company, CRISIL Research Share price movement vis-à-vis NIFTY Fair value movement since initiation (Rs) ('000) Jun-10 Jul-10 Aug-10 Oct-10 Nov-10 Nov-10 Jan-11 Jan-11 Feb-11 Apr-11 May-11 Jul-11 Aug-11 Oct-10 Nov-10 Jan-11 Feb-11 Apr-11 May-11 Jul-11 Lakshmi Finance -indexed to 100 Source: NSE, CRISIL Research NIFTY Total Traded Quantity (RHS) CRISIL Fair Value Lakshmi Source: NSE, CRISIL Research CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 2

5 EARNINGS ESTIMATES We introduce FY12 numbers and expect total income to drop 34% y-o-y to Rs 31.4 mn driven by adverse market conditions. Additionally, we estimate net loss of Rs 8.8 mn primarily due to provisioning on account of losses on mutual fund investments in equity schemes. LAKSHMIFIN (Rs mn) FY12E Total Income 31.4 PAT -8.8 EPS (Rs) -2.9 CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 3

6 VALUATION We continue to use the NAV method to value Lakshmi Finance. The broader market has fallen 16% this year. However, we expect the current financial year to end with a negative return of 10%. FY11 balance sheet is not available (and therefore, actual value of investment as on 31 st March 11). We estimate value of investment at around Rs 279 mn. Based on our market outlook for Valuation is expected to move in line with NAV, linked with equity market performance FY12, we arrive at end year NAV of Rs 91 per share. After adjusting for portfolio expenses and applying a 30% discount for liquidity reasons to the calculated NAV per share, we arrive at a fair value of Rs 58 per share. CRISIL IER reports released on Lakshmi Finance and Industrial Date Nature of report Fundamental grade Fair value Valuation grade CMP (on the date of report) 8- Initiating coverage* 1/5 Rs 73 5/5 Rs Nov-10 Q2FY11 result update 1/5 Rs 73 3/5 Rs Feb-11 Q3FY11 result update 1/5 Rs 58 5/5 Rs Aug-11 Q1FY12 result update 1/5 Rs 58 5/5 Rs 34 * For detailed initiating coverage report please visit: CRISIL Independent Equity Research reports are also available on Bloomberg (CRI <go>) and Thomson Reuters. CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 4

7 FINANCIALS Income Statement Balance sheet (Rs mn) FY08 FY09 FY10 FY11# FY12E (Rs mn) FY08 FY09 FY10 FY11# FY12E Total Income Sources of Funds Expenditure Equity capital Operating Profit Reserves and surplus Provisions & write-offs PBT Networth Tax Deferred Tax Liability (net) PAT Current Liabilities and Provisions Ratios Total Liabilities FY08 FY09 FY10 FY11# FY12E Growth Applications of Funds Total Income (%) 23.9% -66.9% % nm -34% Net Fixed Assets PAT -46.2% nm nm -42.4% % EPS (%) -46.2% nm nm -42% % Investments Return ratios Current assets, loans & advances Return on average equity (RoAE) (%) 13.6% -8.7% 25.2% 12.5% -3.1% Cash & Bank Balance Return on average assets (ROAA) (%) 12.5% -8.0% 23.4% 11.8% -2.8% Total Assets Dividend Dividend per share (Rs) Dividend payout ratio (%) 25.5% nm 12.5% 21.7% -85.3% Quarterly financials Dividend yield (%) 9.5% 4.1% 6.8% 6.8% 6.8% (Rs mn) Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Total Income Valuation Multiples Price-earnings (x) 2.7 nm Change (q-o-q) 10% 51% 11% -53% -31% Price-book (x) PAT Per Share FY08 FY09 FY10 FY11# FY12E Change (q-o-q) 8% 45% 9% -95% 438% Earnings Per Share (Rs) Book Value per share (BVPS) EPS Dividend per share (Rs) Actual O/s Shares Change (q-o-q) 8% 45% 8% -95% 438% Note: All ratios are computed on Adj PAT #FY11 numbers are based on abridged financials Source: Company, CRISIL Research estimate CRISIL Limited. All Rights Reserved. CRISIL RESEARCH 5

8 CRISIL Research Team Senior Director Mukesh Agarwal +91 (22) Analytical Contacts Tarun Bhatia Director, Capital Markets +91 (22) Prasad Koparkar Head, Industry & Customised Research +91 (22) Chetan Majithia Head, Equities +91 (22) Sudhir Nair Head, Equities +91 (22) Jiju Vidyadharan Head, Funds & Fixed Income Research +91 (22) Ajay D'Souza Head, Industry Research +91 (22) Ajay Srinivasan Head, Industry Research +91 (22) Sridhar C Head, Industry Research +91 (22) sridharc@crisil.com Manoj Mohta Head, Customised Research +91 (22) mmohta@crisil.com Business Development Vinaya Dongre Head, Industry & Customised Research +91 (22) vdongre@crisil.com Ashish Sethi Head, Capital Markets +91 (22) asethi@crisil.com CRISIL s Equity Offerings The Equity Group at CRISIL Research provides a wide range of services including: Independent Equity Research IPO Grading White Labelled Research Valuation on companies for use of Institutional Investors, Asset Managers, Corporate Other services by the Research group include Funds & Fixed Income Research Mutual fund rankings Wealth Tracking and Financial Planning tools for asset managers, wealth managers and IFAs Valuation for all debt instruments Developing and maintaining debt and hybrid indices Consultancy and research support to retirement funds Industry & Customized Research Provide comprehensive research coverage across 65 sectors Customised research on market sizing, demand modelling and entry strategies Customised research content for Information Memorandum and Offer Documents CRISIL Limited. All Rights Reserved.

9 About CRISIL Limited CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations. About CRISIL Research CRISIL Research is the country s largest independent and integrated research house with strong domain expertise on Indian economy, industries and capital markets. We leverage our unique research platform and capabilities to deliver superior perspectives and insights to over 10 domestic and global clients, through a range of research reports, analytical tools, subscription products and customised solutions. To know more about CRISIL IER, please contact our team members: Vinaya Dongre Head, Business Development vdongre@crisil.com I Phone : Ashish Sethi Head, Business Development asethi@crisil.com I Phone : Sagar Sawarkar Senior Manager, Business Development ssawarkar@crisil.com I Phone : Regional Contacts: Ahmedabad / Mumbai Vishal Shah - Manager, Business Development vishah@crisil.com I Phone : Bengaluru Gayathri Ananth Senior Manager, Business Development gs@crisil.com I Phone : Chennai / Hyderabad Kaliprasad Ponnuru - Manager, Business Development kponnuru@crisil.com I Phone : Delhi Arjun Gopalkrishnan - Manager, Business Development agopalakrishnan@crisil.com I Phone : Kolkata Priyanka Agarwal - Manager, Business Development priyagarwal@crisil.com I Phone : Mumbai / Pune Vivek Tandon - Manager, Business Development vtandon@crisil.com I Phone : Head Office: CRISIL House, Central Avenue, Hiranandani Business Park, Powai, Mumbai Phone : CRISIL Limited. All Rights Reserved. Web: Download reports from: