IDFC - 3QFY12 Results Update - Motilal Oswal

CMP: INR134
TP: INR150
Buy

IDFC's 3QFY12 PAT increased by 19% YoY to INR3.8b, in line with est. Higher than expected provisions of INR978m negated the benefit of lower than expected expenses (INR1.3b v/s our estimate of INR1.5b), leading to in-line profitability. GNPA increased by INR708m QoQ in absolute terms and 10bp QoQ to 0.3% in percentage terms.

* Loans up 12% QoQ: Sanctions grew 120% YoY (declined 4% QoQ) to ~INR78b, while disbursements grew 61% QoQ and 14% YoY to INR58b. Consequently, loans grew strongly by 25% YoY and 12% QoQ to INR439b.

* Asset pipeline shrinks QoQ: Asset pipeline shrank 7% QoQ to INR171b. On a YTD basis, the share of the Energy segment in the outstanding loan pipeline has declined sharply to 42% from 57% as on March 2011.

* Spreads up 7bp QoQ at 2.37%: Spreads (on 12-month rolling basis) improved to 2.37% v/s 2.3% in 2QFY12. NII grew strongly by 19% YoY and 10% QoQ, led by a 15% YoY and 8% QoQ growth in NII from infrastructure activity, while NII from treasury grew 55% YoY and 24% QoQ.

* Non-interest income down ~45% QoQ: Non-interest income declined 45% QoQ (grew 9% YoY) to INR2.1b as IDFC recorded profit of INR840m on sale of 25% stake in AMC business v/s INR2.4b income booked due to NSE stake sale in 2QFY12. Loan-related and other fees declined 42% YoY and 38% QoQ to INR300m.

Valuation and view: We expect IDFC to report an EPS of INR10.5 in FY12 and INR11.4 in FY13, and ABV (adjusted for inv. in other ventures) of INR74 in FY12 and INR82 in FY13. Stock trades at 1.5x FY12E and 1.3x FY13E ABV. Buy.

Source : Equity Bulls

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