Tag - growth

01 Jul

Higher Provisions due to increasing Covid-19 Cases to be made – SBI Life

Update on Indian Equity Market:

On Thursday, markets ended lower with Nifty closing 42 points to end at 15,680. DRREDDY (+2.8%), HINDALCO (+2.1%), and BJAT (+1.7%) were the top gainers on the index while BAJAJFINSV (-2.2%), BRITANNIA (-1.4%) and INFY(-1.2%) were the top losers for the day. 

Among the sectoral indices,  PHARMA (+0.9%),  AUTO (+0.8%), and FMCG (+0.4%) were the top gainers, while IT (-0.6%), FINANCIAL SERVICES (-0.4%), and PRIVATE BANK (-0.3%) were the top losers.

 

Excerpts of an interview with Mr. Mahesh Kumar Sharma, MD and CEO of SBI Life on CNBCTV18 dated 30th June 2021:

  • SBI Life Insurance saw a slowdown in their group business in May. The company only registered a growth of 1.35 percent in new business premium, owing to the lockdown.
  • On a YoY basis, the company saw higher claims in H2FY21 over H1FY21. To address the issue of higher claims, the company has taken steps to tackle the negative impact.
  • SBI Life has set aside a higher amount for provisions for any potential spike in Covid-19 claims Rs 1,830 mn vs Rs 400 mn in FY21 and has changed the mortality assumptions for better risk management.
  • If vaccinations continue at this rate, the company expects the full recovery to pre-covid levels by the end of this year. However, the company is confident of a spike in claims during the upcoming quarter.
  • Despite the lockdowns in May, the company expects positive performance due to lifting restrictions and a digital outreach system developed by the company to contact its customers.
  • Individual Non-single premiums are the biggest contributors to the company’s new business premiums due to raising awareness about health insurance and other products due to the pandemic. The company expects to maintain its growth trajectory in the new business premium in the mid-teens over the next few years. 
  • The company hasn’t changed its underwriting policy. The company is confident of the vaccination drive boosting the number of vaccinated insurable population and has no plans to reduce the scope of insurance to the only vaccinated population. 

Asset Multiplier Comments:

  • The insurance sector has been one of the worst-hit sectors due to Covid-19. With the effects of the pandemic tapering and an informed target customer base, there are better days ahead.
  • India’s insurance penetration is very low compared to developed countries. This industry has reached an inflection point from where SBI Life and its peers can achieve steady growth.

 

Consensus Estimates (Source: market screener website): 

  • The closing price of SBI Life was ₹1,007/- as of 1-July-2021.  It traded at 53x/ 46x the EPS estimate of ₹ 19/ ₹ 22  for FY22E/23E respectively.
  • The consensus price target is ₹ 1190/- which trades at 54x the EPS estimate for FY23E of ₹ 22/-
  • In the case of insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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20 May

Good Momentum seen in Asset and Wealth Management segments- IIFL Wealth

Update on Indian Equity Market:

On Thursday, markets were in the red, with Nifty declining 124 points to close at 14,906. CIPLA (2.4%), M&M (2.3%), and BPCL (2.1%) were the top gainers on the index while TATA STEEL (-5.1%), HINDALCO (-4.2%), and COALINDIA (-3.4%) were the top losers for the day. Among the sectoral indices, REALTY (1.0%), and PSU BANK (+0.4%) were the only gainers, while METAL (-3.2%), BANK (-1.0%), and PRIVATE BANK (-1.0%) lead the losers.

Excerpts of an interview with Mr. Karan Bhagat, CEO of IIFL Wealth aired on CNBC TV-18 on 19th  May 2021 :

  • The revenue recognition on a trailing basis instead of upfront basis has seen a strong cyclical recovery over the past 8 quarters. The Wealth Management business is poised to grow from here on.  
  • The Asset Management business has seen a stellar recovery over the past year with an increase in both listed and unlisted equity segments. 
  • NBFC business is seeing a difficult recovery due to the pandemic. The Loan against Shares segment is fairly collateralized and thus the company hasn’t seen any rise in impairment costs. The stable Net Interest margins and lower operating costs are good tailwinds going ahead.  
  • AUM growth is expected in the low teens with organic growth and around 20% on a Mark to Market basis.
  • The company has improved its revenue mix to Annual recurring revenue contributing to around 70-80% as opposed to the brokerage-centric business model over the last 2 years. The management expects this to stabilize at these levels going forward.

Asset Multiplier Comments:

  • India is in the midst of a transformation in its savings and investing habits, going forward Asset and Wealth Management are going to see manifold growth as market penetration increases.
  • The company is well poised to reap the rewards of compartmentalization and operating efficiencies going ahead in both the Asset and the Wealth Management business.

Consensus Estimates (Source: market screener website): 

  • The closing price of IIFL Wealth was ₹1,100/- as of 20-May-2021.  It traded at 23x/ 19x the consensus EPS estimate of ₹ 48/ ₹ 59 for FY22E/23E respectively.
  • The consensus price target is ₹ 1360/- which trades at 23x the EPS estimate for FY23E of ₹ 59/-. 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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25 Nov

Low penetration translates to enormous growth opportunities – HDFC LIFE

Update on the Indian Equity market:
On Tuesday, the Nifty50 index closed at a record high of 13,055 (+1.0%) as hopes for faster economic recovery were renewed due to Covid-19 vaccine progress. BANK (+2.5%), PRIVATE BANK (+2.3%), and REALTY (+1.8%) led the sectoral gainers and there were no sectoral losers. Among the stocks, ADANIPORTS (+4.5%), AXISBANK (+3.9%), and HDFCBANK (+3.5%) led the gainers. TITAN (-1.5%), HDFC (-1.4%), and BPCL (-1.2%) led the laggards.

Excerpts of an interview of Ms. Vibha Padalkar, MD & CEO, HDFC Life aired on CNBC TV18 on 20th November 2020:

• The green shoots are being seen and each month has been better than the previous month. On YTD basis, the industry has declined 8% YoY while HDFC Life has grown 8%. The month of October 2020 has been one of the best with 50% growth in new business premium.
• The growth is not linked to the festive season because insurance is a long-term protection and savings outlay. The growth is due to inherent need felt by the customers. Due to the high conviction about the need of insurance, the growth has been across distribution touch points-bancassurance, and the new age ecosystem channels.
• HDFC recently sold some stake in HDFC Life due to regulatory requirements. RBI had asked HDFC to get the shareholding in both of its insurance subsidiaries to 50% levels which led to stake sale to comply before December 2020. Despite the stake sale, HDFC will continue to remain the promoter in the foreseeable future.
• Penetration levels remaining so low, the growth opportunities for HDFC Life are enormous.
• Sanchay policies- the company keeps repricing it and over the past 18-24 months since the product was launched, pricing for new policies has moved in tune with the interest rates.
• The company’s focus has been on prompt protection-mortality, morbidity, longevity and interest rate risk.
• Unit linked products are continuing to see an uptick as there is a recovery in the equity market.
• Covid-19 products are awaiting approval and it is in combination with having an indemnity on covid and is expected to do well. There is an uptick on the Covid-19 claims, which is within the company’s actuarial assumptions.
• The protection products witnessed 38% growth and is one of their best performing products, followed by Sanchay product. Sanchay par advantage has catapulted to 30-35 % of their business and is under the participating umbrella of products.
• They expect a high single digit growth for Annual Premium Equivalent (APE) for FY21E. On Value of New Business (VNB), this year is going to be flat, and margins are expected to be at the same level as FY20.

Consensus Estimate: (Source: market screener website)
• The closing price of HDFC Life was ₹ 666/- as of 24-November-2020. It traded at 97x/ 83x/ 66x the consensus earnings estimate of ₹ 6.9/ 8.0/ 10.1 per share for FY21E/FY22E/FY23E respectively.
• The consensus target price of ₹ 642 implies a PE multiple of 64x on FY23E EPS of ₹ 10.1/-.
• In the case of life insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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09 Sep

COVID-19 has led to a delay in recovery – Yes Bank

On Tuesday, Nifty ended 0.3%, lower than the previous close at 11,317. The top gainers for Nifty 50 were BPCL (+2.8%), HCL Tech (+2.0%), and Infy (+1.4%) while the losing stocks were Infratel (-8.1%), ZEEL (-4.7%), and Tata Motors (-4.5%). The only sector in green was IT (+1.2%). The top losing sectors for the day were Media (-3.0%), Realty (-1.7%), Pharma (-1.6%) & PSU Bank (-1.6%).

Edited excerpts of an interview with Mr Prashant Kumar, MD & CEO, Yes Bank Ltd; dated 07th September 2020 from CNBC TV 18:

The recovery target would be for the entire stressed book; it is an issue about the timing. Due to COVID, the targets which the bank was expecting during FY21E have slowed down a bit. But he thinks that the bank is absolutely on track and during the current year and going forward he is confident that they will be able to recover.
Yes bank has seen a 22% cost reduction in 1QFY21. Yes Bank is targeting cost reduction of at least 10% year-on-year (YoY), but because of COVID, everything is not working in the way it used to work in the past. So, he thinks that is helping them to reduce costs further. They are working on the current situation. The Bank has launched a programme which allows a sizeable portion of the workforce to work from home which will be convenient for the younger generation & women associated with the bank.
Yes Bank already has provision coverage of almost 76% on their loan book. This loan book with 76% coverage where the estimates of loss given default (LGD) is something around 60-65%. So, that kind of loan assets can very easily move to SPV.
Talking about Dish TV stake of 24% with Yes Bank, Mr Kumar said that every case has its own merits and reasons for taking a specific course of action. In the case of Dish TV, they are evaluating the different options. He further added that there are a number of suitors for Dish TV and that they are looking for the best deal.
Deposits have seen 11% QoQ growth in 1QFY21. Going forward, he sees good progress on deposit front. There is deposit accretion seen. As of March 2020, the corporate & retail contribute is 50:50. The bank is also able to protect their margins accordingly.
Loan Book recoveries rate elongated due to COVID situation.
Yes bank looking for three partners on life as well as non- life.

Consensus Estimate: (Source: market screener website & investing.com)
The closing price of Yes Bank Ltd was ₹ 14/- as of 08-September-2020. It traded at 0.8x/0.5x/1.0x the consensus book value estimates of ₹ 17.0/29.0/13.5 for FY21E/FY22E/23E respectively.
The consensus target price of ₹ 28/- implies a PE multiple of 2.1x on FY23E EPS of ₹ 13.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Feb

SBI Cards IPO to hit the market this quarter: SBI Chairman

Update on the Indian Equity Market:

On Tuesday, NIFTY ended positive at 11,979 (+2.3%). The top gainers in NIFTY were TITAN (+7.3%), Infratel (+5.7%) and IOC (+5.6%). ZEE (-5.3%), Bajaj Auto (-3.8%) and Yes Bank (-2.8%) were the top NIFTY losers. All the sectors were in the green. The top sectoral gainers were Metal (+3.3%), Financial Service (+2.9%) and Realty (+2.8%).

Excerpts from an interview with Mr Rajnish Kumar, Chairman, State Bank of India (SBI) that was published in Economic Times on 03rd February 2020:

  • SBI believed that no one needed an insurance cover as far as deposits in SBI are concerned. But as far as the system is concerned, after the problems with the cooperative bank which happened in Mumbai, there was a demand that the limit for insurance cover which was set some 27 years ago needs to be revised. This move was much needed and will create more confidence in the minds of the people about banks.
  • AGR Telecom problems: According to him, the matter is sub judice and will be waiting for the Supreme Court decision. The hearing is on 4th February. He thinks and believes that the matter will ultimately be sorted out to the satisfaction of both the parties – the government and the telecom operators. He had a general discussion with a lot of people in the telecom sector where they hinted that they will have at least three to four large telecom operators and the country cannot be served with a lesser number of telecom operators. This has given Mr Kumar  confidence and hope that this matter will get sorted out.
  • Barring one HFC account, things are looking up at least on the corporate recovery front.  This HFC account was in trouble, and SBI was readying for it since September and had started providing for it. Mr Kumar had said in the past that from the recovery and resolution perspective, December and March quarters are likely to be very good for the banking system. SBI is expecting some good resolution and implementation of resolution plans in respect of a couple of large accounts.
  • The loan growth for SBI was around 7% in this quarter coming from their international banking book. There is more demand for foreign currency borrowings from Indian corporates. The retail story is intact and SBI is growing very well. The only thing is the corporate sector demand revival. The loan pipeline is fairly good. As these loans get disbursed, FY21E growth numbers may turn out to be better than FY20. The utilization of limits definitely improved in the last two months and SBI may end up somewhere around 9% YoY growth.
  • The loan processing fee has improved significantly on a QoQ basis for SBI. It indicates that during the December quarter, SBI has processed more proposals. The loan pipeline is of more than Rs 1 lakh crore and all of these loans will get disbursed eventually over the next six months and that is a good indicator from a recovery point of view.
  • SBI Card valuation: According to him, the penetration of credit cards in India is very low and as the economy develops, there will be demand for credit and credit cards. At the same time, SBI card business is growing decently. SBI IPO is expected to happen in this quarter.
  • He said that the move by the government to divest stake in IDBI Bank and list LIC are two measures that stand out in this year’s budget.

Consensus Estimate: (Source: market screener website)

The closing price of SBI was ₹ 306/- as on 4-February 2020. It traded at 1.2x/ 1.1x/ 1.0x the consensus book value of ₹ 249/ 280/ 317 for FY20E/ FY21E/ FY22E respectively.

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23 Jan

Growth is bound to come – Shyam Srinivasan, Federal Bank

Excerpts from an interview of Mr Shyam Srinivasan, MD & CEO, Federal Bank with CNBC TV-18 dated 21-01-2020:

Update on the Indian Equity Market:

On Wednesday, NIFTY closed -0.5% lower. Among sectoral indices NIFTY Metal (-1.5%), NIFTY PVT Bank (-1.0%), NIFTY Auto (-0.9%) closed lower. While Nifty Media (1.7%), NIFTY IT (+1.0%), NIFTY FMCG (+0.02%) closed on a positive note. The biggest gainers were Zeel (+4.9%), Grasim (+2.6%), Nestle (+1.8%) whereas ONGC (-5.3%), Cola India (-5.2%) and NTPC (-3.9%) ended with losses.

  • It was a weak third-quarter for Federal Bank as loan growth and net interest margins came in at an all-time low.
  • Mr Srinivasan says, there are no significant issues except for the two housing accounts which are under stress. Other granular businesses are showing marked progress and it will continue.
  • He says they don’t have a single case above 100 cr which is dodgy and therefore the outlook is positive.
  • Speaking about their non-corporate book, he says, their portfolio is significantly secured. Banks that celebrated unsecured success over many quarters had the gains and now have to face some pain.
  • As the portfolio is secured, between now and next 3-4 quarters, the bank does not expect any large formation of stress on the secured side unless property prices get crash.
  • On loan growth, he says, retail is looking north of 24-25 per cent. The large tickets are okay, so the blended margins as the bank exit FY20 will be between 14%- 15%.
  • The gold loan book is expected to grow at 25%. The bank is also gaining share in the auto loan segment, particularly in Mumbai, Kerala and south.
  • Agriculture is seeing pain across banks due to waivers announced by various states.
  • He says growth is bound to come. It cannot keep the system in paise mode. So, the focus will be on getting credit cost down.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of Federal Bank was ₹ 93.70/- as of 22-January-20. It traded at 1.2x / 1.1x / 1.0x the consensus Book Value for FY20E / 21E / 22E of ₹ 73.0/81.5/90.6 respectively.
  • Consensus target price of ₹ 112/- implies a Price to Book multiple of 1.2x on FY22E Book Value of ₹ 90.6.
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13 Nov

VIP Industries: Revenue growth target of 5-10% for next quarter as well as for the whole year

Update on the Indian Equity Market:

Markets started the week marginally higher as Nifty closed the day 5 points higher to 11,912. 6 out of 11 sectoral indices closed the day on a positive note with MEDIA (2.8%), PVT BANKS (1.4%) and BANK (1.3%) led the gains while IT (-0.5%), FMCG (-0.5%) and AUTO (-0.2) were the laggards. Among the stocks, ZEEL (6.2%), YESBANK (5.7%) and BPCL (2.8%) led the index higher whereas NESTLEIND (-2.4%), HEROMOTO (-2.1%) and HINDALCO (-2.1%) were the worst-performing stocks.

VIP Industries:  Revenue growth target of 5-10% for next quarter as well as for the whole year

Key takeaways from the interview of Mr Dilip Piramal, Chairman, VIP Industries dated 11th November 2019 published in LiveMint:

  • Mr Piramal started the interview with his remarks on the 2QFY20 performance of VIP Industries. He mentioned that though revenues were lower, EBITDA was higher due to two reasons. First, due to the implementation of IND-AS 116, the EBITDA went up by 6 basis points. Second, the company also witnessed improvement in gross margins which contributed to the EBITDA growth.
  • The company reported YoY growth of 3% in revenues. He said that he was not surprised by the lower growth in revenues as it aligns with the general trend in the economy.
  • About the revenue growth in the future, he said that things are slightly better than before. The company is looking to achieve between 5-10% growth in this quarter and for the whole year. This is lower as compared to the historical growth rate of around 25%.
  • On being asked about whether the customers are up-trading, he said that there is not much of a change. In fact, the lower end is increasing faster for about nearly one year.
  • He mentioned that there is no increase in competition for the company. The industry is very small with two bigger players and one quite small player who is very competitive in the lower end. It is more like a segment-wise competition. The competitive pressure is the same.
  • After the implementation of Goods and Service Tax (GST), the market share has moved from unorganised players to the organized players. The company achieved a growth of 25% in FY18 largely on the back of implementation of GST.

Consensus Estimate (Source: market screener website)

  • The closing price of VIP Industries was ₹ 437/- as of 11-November-19. It traded at 37x/ 30x the consensus EPS for FY 20E/ FY 21E of ₹ 11.8/ 14.6 respectively.
  • Consensus target price of ₹ 509/- implies a PE multiple of 35x on FY22E EPS of ₹ 14.6/-.
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