Dear All,
Forwarding you the Result Update on State Bank of India for 4QFY2011 with a Buy recommendation and a Target Price of `2,842 (12 months).
For 4QFY2011 SBI posted nominal profit of `21cr on a standalone basis compared to our as well as street’s expectation of ~`3,000cr. Profitability was hampered on account of a sharp dip in NIM, higher NPA provisions and rise in effective tax rate. The other key negative was the substantial `7,927cr pension burden that was adjusted against net worth (10.9% impact on FY2011 pre-adjustment net worth), taking tier-I CAR below the 8% comfort level.
At the CMP, the stock is trading at 1.5x FY2013E ABV (adjusting for value of subsidiaries). In our view, the negatives are already in the stock price, and earnings growth outlook is strong due to lending rate hikes, lower provisioning burden and lower taxation going forward. Due to strong CASA market share gains and high fee income, SBI’s core RoEs have improved over the past few years and, unlike most other PSBs, actual FY2011 RoEs are below core levels due to low asset yields, providing scope for upside as yields normalise to sectoral averages. Hence, we maintain our Buy recommendation on the stock but with a lower target price of `2,842 (`3,199) to factor in the reduction in net worth due to pension liabilities and relatively lower capital adequacy position.
Disappointing quarter on all fronts: SBI’s results for 4QFY2011 were weak on almost all counts. Reported NIM compressed sharply by 54bp qoq on the back of a decline in yield on advances despite a 65bp hike in base rate (50bp hike in BPLR) during the quarter. The bank adjusted the liability of ~`8,000cr on account of pension liability towards reserves, which has resulted in capital adequacy falling below comfortable levels, with tier-I CAR at 7.7%. This raises concerns over capital constraint for future growth if the proposed rights issue does not go through soon enough. Accordingly, presently we have cut our credit growth estimates for the bank to 16% each from 20% each for FY2012 and FY2013. On the asset-quality front also, the bank disappointed with the annualised slippage ratio rising to 3.6% from 2.0% in 3QFY2011 and 2.5% in 9MFY2011.
Kindly click on the following link to view the Report.
State Bank of India - 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.
No comments:
Post a Comment