Dear All,
Forwarding you the Result Update on South Indian Bank for 4QFY2011 with an Accumulate recommendation and a Target Price of `25 (12 months).
For 4QFY2011, South Indian Bank (SIB) reported net profit growth of 111.7% yoy (8.5% qoq) to `82cr (aided by low base of 4QFY2010 PAT due to prior-period adjustments), slightly above our estimates of `77cr. Key highlights of the results were strong balance sheet growth and improvement in asset quality.
We recommend an Accumulate rating on the stock.
Business growth above industry with improved asset quality: The bank’s business growth continued to register strong traction, with advances growth at 27.1% yoy (6.8% qoq) and deposits growth at 29.2% yoy (10.1% qoq). The bank’s CASA deposits stood at `6,404cr (up by 5.9% qoq) and constituted 21.5% (down from 22.4% in 3QFY2011) of total deposits. NRE deposits increased by 2.7% sequentially to `3,800cr. The asset quality of the bank improved during 4QFY2011 with absolute gross and net NPAs decreasing by 9.2% and 19.3% qoq, respectively. Gross and net NPA ratios improved sequentially to 1.1% and 0.3%, respectively. The provision coverage ratio stood at 73.9% (70.7% in 3QFY2011) excluding technical write-offs. The slippage ratio for FY2011 stood at 0.7%, down from 1.5% in FY2010.
Outlook and valuation: SIB plans to raise ~`1,000cr during FY2012, which will enable it to maintain its strong growth, especially in its gold loan business. Currently, the stock is trading at moderate valuations of 1.2x FY2013E ABV.
In light of capital-raising and strong expansion plans, we value the bank at 1.3x FY2013E ABV. Hence, we recommend an Accumulate rating on the stock with a target price of `25.
Kindly click on the following link to view the Report.
South Indian Bank - RU4QFY2011
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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