L&T Finance Holding Ltd. (LTFH)

Transcription

1 Result/Concall Update October 23, 2012 L&T Finance Holding Ltd. (LTFH) CMP STOCK INFO BSE NSE L&TFH Bloomberg LTFH IN Reuters LTFH.BO Sector NBFC Face Value (Rs) 10 Equity Capital (Rs Mn) Mkt Cap (Rs Mn) 92,940 52w H/L (Rs) 56/40 Avg Daily Vol (BSE+NSE) 1,147,128 SHAREHOLDING PATTERN % (as on 30th Sep. 2012) Promoter 82.6 FII 2.6 DII 1.9 Others 12.9 Source: BSE STOCK PERFORMANCE (%) 1m 3m 12m L&TFH SENSEX L&TFH v/s SENSEX : Rs.54 Reco : BUY Target : Rs.63 Source: Capitaline, IndiaNivesh Research 19/10/ /11/ /11/ /11/ /12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/ /10/ /10/2012 L&TFH Sensex Source: Capitaline, IndiaNivesh Research Daljeet S. Kohli Head of Research Mobile: , Tel: daljeet.kohli@indianivesh.in Yogesh Hotwani Research Analyst Mobile: Tel: yogesh.hotwani@indianivesh.in Impressive growth along with margins improvement, asset quality slightly down.revised target upwards to Rs63 from Rs58... LTFH s loan book growth remains robust at 27% yoy (6% qoq). L&T infra (LTIF) registered a higher loan growth comparatively at 32% yoy (8% qoq) while L&T Finance (LTF) of 24% yoy (4% qoq). Asset quality (cons) witnessed a marginal pressure with increase of 18 / 7 bps qoq in Gross/ Net NPA. LTIF s Gross / Net NPA increased by 26 / 17 bps and LTF by 11 / 10 bps qoq. Excess provisioning of Rs 720 mn in LTIF and Rs 890 mn in LTIF over the regulatory requirement remains the key positive. NIMs (cons) surprised positively with increase of 19 bps qoq to 5.8% mainly due to sequential decline in cost of funds of bps each in both financing subsidiaries. NII was ahead of expectation at Rs 3.8 bn, increase of 31% yoy. Net profit was up 13% yoy to Rs 1.4 bn, cautious approach for maintaining excess provisioning continues with increase of 62% yoy (110 bps credit cost vs 83 bps in Q2FY12). Lowering our earnings by 1% each for FY13E and FY14E to factor in the higher provisioning. Result Highlights: Loan growth intact, disbursements picked up: Consolidated loan book grew by 27% yoy (6% qoq) to Rs 276 bn aided by LTF s loan growth of 24% yoy (4% qoq) to Rs 156 bn and LTIF of 32% yoy (8% qoq) to Rs 120 bn. Disbursements (cons) declined by 13% yoy to Rs 49 bn due to sharp decline in LTIF s disbursements (down 30% yoy) to Rs 12.6 bn and LTF of Rs 37 bn. However on sequential basis, disbursements improved by 117% in LTIF and 12% in LTF. 67% of LTIF s loan book is under project loan and of which over 50% are operational. Growth in LTF (retail financing franchise) disbursements was largely attributed to 32% yoy increase in rural product disbursements. Loan Book (Rs mn) % of total Q2FY13 Q2FY12 % YoY Q1FY13 % QoQ L&T Finance Hldg (Cons) L&T Infra Ports Thermal Power Renewable Power Roads Telecom Oil and Gas L&T Finance Construction Equipment Transportation Equipment Rural Products Micro Finance Corporate loans Supply Chain Finance Capital Market products Disbursements (Rs mn) L&T Finance Hldg (Cons) L&T Infra L&T Finance IndiaNivesh Research IndiaNivesh Securities Private Limited 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.

2 NIMs improved marginally: NIMs (cons) improved by 18 bps qoq to 5.6% however stable compared to Q2FY13 due to 1) decline cost of funds in both the financing subsidiaries and 2) improvement in yields on assets in LTIF. NIMs of LTIF improved by 24 bps qoq to 5.2% due to sharp decline in cost of funds of 30 bps qoq to 9.7% and improvement in yields by 8 bps qoq to 13.3%. LTF s margins compressed by 24 bps qoq to 5.8% mainly due to decline in yield on funds 44 bps qoq to 14% on back of higher disbursals at the end of September Further company continues to maintain its Asset liability mix with more dependency on long term borrowing. Borrowings from Mutual/Pension/ Insurance funds have increased substantially during Q2FY13. Yield / Cost / Margin (%) Q2FY13 Q2FY12 bps YoY Q1FY13 bps QoQ L&T Finance Hldg (Cons) NIM NIM* L&T Infra Yield on Loans Cost of Funds NIM NIM* L&T Finance Yield on Loans Cost of Funds NIM NIM* LTIF Borrowings Rs mn % of total Q2FY13 Q1FY13 % QoQ Banks Public Mutual/Pen./Ins. Fund Corporates FII/DII Total Borrowings LTF Borrowings Rs mn % of total Q2FY13 Q1FY13 % QoQ Banks Public Mutual/Pen./Ins. Fund Corporates FII/DII NMF Total Borrowings Asset quality impacted, however excess provisioning remains positive: Asset quality pressure was visible as Gross and Net NPA of was up 18 and 7 bps qoq to 1.8% and 1.2% vs 1.6% and 1.2% in Q1FY13 respectively. In absolute terms, Gross NPA was up by 17% and Net NPA by 12% qoq to Rs 4.8 and Rs 3.3 bn respectively. However excluding MFI NPAs, it was up 20% qoq each in Gross and Net NPAs to Rs 4.2 and Rs 3 bn respectively. LTF asset quality was more impacted comparatively with sequential increase of 26 / 17 bps in Gross / Net NPA to 1.6% / 1% respectively. IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23,

3 in absolute terms, Gross / Net NPA was up 24% / 25% qoq to Rs 2.4 / 1.5 bn. In Q2FY13, due to macro headwinds, it has made an additional provision of Rs 898 mn higher than regulatory requirement. Further it has provided Rs 151 mn on MFI book taking the outstanding MFI NPAs to Rs ~280 mn. LTIF s asset quality, though affected, but there was slight increase of bps in Gross / Net NPA to 1.5% / 1.3%. Further it continues to follow conservative policy on provisioning with standard asset provisioning of % as compared to 0.25% regulatory requirements. In Q2FY13, due to concerns in infra segment, it has made an additional provision of Rs 720 mn higher than regulatory requirement. Asset Quality Q2FY13 Q2FY12 % YoY Q1FY13 % QoQ L&T Finance Hldg (Cons) Gross NPA Net NPA Gross NPA (excl MFI) Net NPA (excl MFI) Gross NPA (%) bps bps Net NPA (%) bps bps L&T Infra Gross NPA Net NPA Gross NPA (%) bps bps Net NPA (%) bps bps L&T Finance Gross NPA Net NPA Gross NPA (%) bps bps Net NPA (%) bps bps Updates on acquisition: L&T mutual fund has completed Fidelity acquisition and received a SEBI approval for acquisition subject to exit option which will expire on 15 th November Fidelity AMC s has reported a loss of Rs 208 mn in FY12 as against Rs 624 mn in FY11. LTFH has also completed acquisition of Indo pacific housing finance ltd (IPHF) on 10 th October 2012 for a consideration of Rs 1.1 bn. IPHF has an outstanding loan book of Rs 1.8 bn as on September 2012 which consist of primarily self employed and low income borrowers. LTFH has acquired a wholly owned subsidiary of Societe Generale Consumer Finance, FamilyCredit Ltd at a consideration of Rs ~1.2 bn. FamilyCredit is NBFC primarily having 53 branches in 16 states with focus on two wheeler and auto financing. It has the asset size of Rs ~13 bn with healthy margins and capital adequacy of 13.6% and 16.5% respectively. Valuation: LTFH Q2FY13 results were impressive and ahead of our / street expectation with strong growth in overall loan book driven by sequential increase in disbursals in both financing subsidiaries. NIMs surprised positively with increase of 19 bps as against our expectation of stable margins mainly due to decline in cost of incremental borrowings from Mutual funds and insurance companies. Asset quality witnessed pressure but LTFH s cautious approach of maintaining excess provisioning drives comfort on this front. While we have increased our estimates on Net income by 2% each for FY13E and FY14E on back of expansion in margins, earnings are revised IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23,

4 downward by 1% each to factor in the excess provisioning with credit cost of 90 bps as against 70 bps in FY12. At CMP of Rs 54, the stock is trading at P/ABV of 1.9x and 1.7x for FY13E and FY14E respectively. We continue to maintain BUY on stock with upward revised target price of Rs 63. Revisit to estimates (mn) FY13E FY14E Old New Old New Net Interest Income Net Income Pre Provision Profit Profit before tax Net Profit LTFH (Cons) Rs mn Q2FY13 Q2FY12 % YoY Q1FY13 % QoQ H2FY13 H2FY12 % YoY Interest Income Interest Expense Net Interest Income Other Income Net Income Total Income Operating Expense Pre Provisioning Profit Provisions Profit Before Tax Tax Net Profit Loans & Advances Disbursements Net worth Gross NPA Net NPA Gross NPA (excl MFI) Net NPA (excl MFI) Key Ratios (%) bps bps NIM NIM* Yield on Loans* Cost of Funds* Credit Cost* Gross NPA (%) Net NPA (%) Sum of the parts valuation (Rs per share) Valuation Methodology ABV/CMP Value Consolidated LTFH 1.9x FY14E Cons ABV Federal Bank (4.7%) Market Price City Union Bank (4.7%) Market Price IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23,

5 LTIF Rs mn Q2FY13 Q2FY12 % YoY Q1FY13 % QoQ H2FY13 H2FY12 % YoY Interest Income Interest Expense Net Interest Income Other Income Net Income Operating Expense Pre Provisioning Profit Provisions Profit Before Tax Net Profit Loans & Advances Disbursement Gross NPA Net NPA Key Ratios (%) bps bps Yield on Loans Cost of Funds NIM NIM* Cost to Income Gross NPA Net NPA Credit Cost* ROE ROA LTF Rs mn Q2FY13 Q2FY12 % YoY Q1FY13 % QoQ H2FY13 H2FY12 % YoY Interest Income Interest Expense Net Interest Income Other Income Net Income Operating Expense Pre Provisioning Profit Provisions Profit Before Tax Net Profit Loans & Advances Disbursement Gross NPA Net NPA Key Ratios (%) bps bps Yield on Loans Cost of Funds NIM NIM* Cost to Income Gross NPA Net NPA Credit Cost* ROE ROA IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23,

6 P/ABV Band P/E Band x 2.1x 1.9x 1.7x 1.5x x 20x 18x 16x 14x Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 L&T Finance Holdings - Consolidated Income Statement (Rs Mn) FY11 FY12 FY13E FY14E Interest Earned Interest Expended Net Interest Income Other Income Net Income Total Income Total Expenses Pre Provision Profit Provisions Profit before tax Tax Net Profit Balance Sheet (Rs Mn) FY11 FY12 FY13E FY14E Liabilities Equity Reserves and Surplus Net Worth Borrowings Other Liabilities & Provisions Total Liabilities Assets Loans and Advances Net Block Investments & Other Assets Total Assets Valuation Ratios FY11 FY12 FY13E FY14E Earning Per Share (Rs) Book Value Per Share (Rs) Adj Book Value Per Share (Rs) P/E (x) P/BV (x) P/ABV (x) Growth Y-o-Y (%) Loan and Advances Borrowings Balance Sheet Net Interest Income Net Income Net Profit Return Ratios (%) ROE ROA Yield / Margin (%) Yield on Funds Cost of Funds Interest Spread Net Interest Margin Net Profit Margin Other Ratios (%) Cost / Income Interest Expense / Interest Income Net Interest Income / Net Income IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23,

7 IndiaNivesh Securities Private Limited 601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai Tel: (022) / Fax: (022) research@indianivesh.in Website: Disclaimer: This document has been prepared by IndiaNivesh Securities Private Limited (IndiaNivesh), for use by the recipient as information only and is not for circulation or public distribution. This document is not to be reproduced, copied, redistributed or published or made available to others, in whole or in part without prior permission from us. This document is not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. The information contained in this document has been obtained from sources that are considered as reliable though its accuracy or completeness has not been verified by IndiaNivesh independently and cannot be guaranteed. Neither IndiaNivesh nor any of its affiliates, its directors or its employees accepts any responsibility or whatever nature for the information, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this material only. IndiaNivesh directors and its clients may have holdings in the stocks mentioned in the report. To unsubscribe please send a mail to mail@indianivesh.in Home IndiaNivesh Research L&T Finance Holding Ltd. Result/Concall Update October 23, IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.