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Manappuram General Leasing _ Finance_Q4FY10_Result Update money.umakant.info Q2 2010

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Manappuram General Leasing _ Finance_Q4FY10_Result Update money.umakant.info Q2 2010 Powered By Docstoc
					                                                                                                                                                                         Result Update
                                                      Manappuram General Leasing & Finance
                                                                                                          Strong operating performance

May 13, 2010                                        Manappuram General Leasing and Finance (MAGFIL) has reported a net profit of
                                                    Rs408mn for Q4FY10, slightly ahead of our estimates driven by better than
                                                    expected NII and controlled growth in expenses. The NII grew by a robust 17.4%
BUY                                                 qoq to Rs1.1bn driven by 15% qoq growth in advances and 123bps sequential
                                                    expansion in NIMs. The advance growth going forward is likely to remain robust
Price                          Target Price         as MAGFIL plans to open 400 new branches during FY11, taking the total branch
Rs 78                                Rs 90          network to 1,405 by end of FY11.
Sensex                                17,196        The bank asset quality has shown significant improvement over last year as the
                                                    GNPA came down to 1.15% in FY10 from 1.63% in FY09, while NNPA came down
                                                    to 0.49% in FY10 from 0.94% in FY09.
Price Performance
                                                    We continue to remain confident about MAGIL’s growth driven by ability of the
(%)                 1M     3M       6M 12M
                                                    management to open new branches, their upscaling and also ability to contain
Absolute            3      10       44     417      NPAs. We expect a 70% CAGR in earnings over FY10-12E. At the current market
Rel. to Sensex      7          3    41     266      price, the stock is quoting at 3.9x FY11E ABV and 2.7x FY12E ABV with likely
Source: Bloomberg                                   RoEs of 32% over FY10-12E. We continue with our positive stance on the stock
                                                    with BUY recommendation and price target of Rs90.


Stock Details                                       NII growth ahead of estimates
Sector                   Financial Services         MAGFIL’s Q4FY10 NII was ahead of estimates, as the same grew by 17.4% qoq to
                                                    Rs1.1bn driven by 15%qoq growth in advances and 159bps sequential expansion in
Reuters                             MGFL.BO
                                                    NIMs.
Bloomberg                           MGFL@IN
                                           3247     Yield Analysis
Equity Capital (Rs mn)
Face Value(Rs)                               10      (%)                              Q4FY10          Q4FY09          Q3FY10          yoy chg              qoq chg
No of shares o/s (mn)                       325     Yield on advances#                   25.4               24.8          23.8                54               159
52 Week H/L                                85/14    Cost of funds#                           7.0             6.5            6.7               51                35
Market Cap (Rs bn/USD mn)                 25/553    NIM#                                 18.4               18.3          17.1                 3               123

Daily Avg Volume (No of sh)           1004547       Source: Company, Emkay Research                         # Calculated based on average quarterly balances

Daily Avg Turnover (US$mn)                   1.7
                                                    Business growth robust
                                                    The company’s total business grew by a robust 96%yoy to Rs29.8bn in FY10 led by
Shareholding Pattern (%)                            106%yoy growth in advances. The advances for FY10 also includes assignment
                        M’10       D’09     S’09    portfolio of Rs7.1bn.
Promoters               41.0       30.4     30.7
                                                    Advances growth @ 15.0%qoq
FII/NRI                 42.1       40.7     40.1
                                                    Rs mn                             Q4FY10          Q4FY09          Q3FY10          yoy chg              qoq chg
Institutions             1.8        0.6      0.7
                                                    Gold Loan                         18,456               3,975           N/A              364.3                -
Private Corp             0.4        0.8      0.5
                                                    Net Advances                       18,907              4,486        17,520              321.5              7.9
Public                  14.8       27.6     28.0
                                                    % of Net Advances                    98%                89%            N/A               10.2                -
                                                    Assignment portfolio                7,080              8,114         5,080              -12.7             39.4
                                                    AUMs                               25,987             12,600        22,600              106.2             15.0
                                                    Source: Company, Emkay Research



                                                    Financial Snapshot                                                                                     Rs Mn
Kashyap Jhaveri
                                                    Y/E March 31      Net Rev        APAT          EPS        ABV        RoA        RoE              PE     P/ABV
kashyap.jhaveri@emkayglobal.com
+91 22 6612 1249                                                        Rs mn      Rs mn           (Rs)       (Rs)        (%)        (%)             (x)       (x)
                                                    FY09                   1,272      301           2.8       14.5         3.6       29.1           27.9       5.5

Pradeep Agrawal                                     FY10                   3,409     1,195          6.3       31.9         6.0       31.0           12.6       2.5
pradeep.agrawal@emkayglobal.com                     FY11E                  6,446     2,106          5.5       20.5         5.2       30.2           14.3       3.9
+91 22 6612 1340                                    FY12E               10,708       3,455          9.1       28.9         5.2       36.4            8.7       2.7
                                                   Source: Company, Emkay Research




Emkay Global Financial Services Ltd                                                                                                                                  1
                                                      Manappuram General Leasing and Finance                                              Result Update


                                                     Operating profit growth healthy
                                                     The operating profit grew by a healthy 19.5% qoq, led by robust growth in NII and controlled
                                                     operating expenditure. The operating expenditure grew by 14.3%qoq to Rs450mn, even as
                                                     the employee expenses grew by 47.0%qoq to Rs190mn.

                                                     Provisioning inline with balance sheet growth
                                                     The provisions increased by 42.9% qoq to Rs43mn (0.2% of advances), inline with growth
                                                     in the balance sheet.

                                                     Asset quality robust
                                                     The bank asset quality shown significant improvement over last year as the GNPA came
                                                     down to 1.15% in FY10 from 1.63% in FY09, while NNPA came down to 0.49% in FY10
                                                     from 0.94% in FY09. Most of the NPA in the book are from the residual vehicle portfolio.
                                                     The company has stopped vehicle financing since last two years. The Gross NPAS in gold
                                                     loan, which constitute 98% of the existing book is just 0.39%, while Net NPA is 0.17%,
                                                     though increased slightly over last year.
                                                     Advances growth @ 15.0%qoq
                                                       (%)                                                Q4FY10               Q4FY09            yoy chg
                                                       GNPA %                                                  1.15              1.63              -48bps
                                                       NNPA %                                                  0.49              0.94              -45bps
                                                       GNPA %- Gold Loan                                       0.39              0.31               8bps
                                                       NNPA %-Gold Loan                                        0.17              0.10               7bps
                                                       Source: Company, Emkay Research

                                                     Branch expansion continued at rapid pace….
                                                     The company continued to expand its branch network aggressively during the quarter. The
                                                     company added 135 branches during the quarter, taking the total branch network to 1005.
                                                     The company plans to add another 400 branches over FY11, across East, West and
                                                     Northern region. We have estimated branch additions of 250 in FY11.

                                                     Capital adequacy robust
                                                     The bank is comfortably placed in terms of capital requirement, as the CAR stood a healthy
                                                     28.01% as on 31st March 2010. The capital also got a boost from the QIP placement done
                                                     during Q4FY10. The company placed 3.5mn shares by way of private placement at Rs691
                                                     during Q4FY10, raising Rs2.4bn.

                                                     Valuation and view
                                                     We continue to remain confident about MAGIL’s growth driven by ability of the management
                                                     to open new branches, their upscaling and also ability to contain NPAs. We expect a 70%
                                                     CAGR in earnings over FY10-12E. At the current market price, the stock is quoting at 3.9x
                                                     FY11E ABV and 2.7x FY12E ABV with likely RoEs of 32% over FY10-12E. We continue
                                                     with our positive stance on the stock with BUY recommendation and price target of Rs90.
 Key Financials
YE Mar (Rs Million)                        FY10          FY09       % yoy chg        Q4FY10        Q4FY09             Q3FY10    % yoy chg      % qoq chg
Net interest income                        3,306         1,241            166.4         1,115           401              950        177.9           17.4
Other Income                                  37             31            18.6             2              2               2            12.5        -11.2
Net Income                                 3,343         1,272            162.8         1,117           403              952        177.3           17.3
Operating Expenses                         1,395           601            132.2           450           202              394        122.6           14.3
Operating Profit                           1,890           638            196.4           666           200              558        232.5           19.5
Provisions & Contingencies                   142           178            -20.2            43            61               30        -28.8           42.9
Profit before tax                          1,818           463            292.8           623           140              527        346.2           18.1
Provision for Taxes                          621           160            288.5           215            51              177        323.3           21.2
Net Profit                                 1,197           303            295.0           408            89              350        359.3           16.6
 Note: yoy numbers are not comparable due to merger of Manappuram Tamil Nadu Finance into MAGFIL wef Q3FY10.




Emkay Research           13 May 2010                                                                                                                        2
                                                                      Manappuram General Leasing and Finance                                                                            Result Update

 Key Financials
Income Statement                                                                                        Balance Sheet
Y/E, Mar (Rs. m)                          FY09        FY10E          FY11E          FY12E               Y/E, Mar (Rs. m)                                     FY09         FY10E          FY11E         FY12E
Net interest income                      1,241          3,372          6,415        10,676              Equity share capital                                   213            340            762            762
Other income                                  31            37             31             31            Reserves And Surplus                                 1,436          5,690         7,148        10,335
Net Income                               1,272          3,409          6,446        10,708              Net worth                                            1,649          6,071         7,910        11,097
Operating expenses                          601         1,395          2,833          4,794             Borrowings                                           4,891        18,357         32,395        53,311
Depreciation                                  34            57             67             70            Deferred tax liability                                  -14               0             0              0
Pre-provision profit                        638         1,957          3,547          5,843             Current liabilities                                    381          1,015         1,046          1,046
Provisions                                  178            142           331            569             Net block                                              280            535            525            521
Profit before tax                           463         1,818          3,215          5,274             Investments                                              29         1,407              29            29
Tax                                         160            621         1,109          1,820             Loans                                                4,500        18,956         37,714        60,947
Tax rate                                      35            35             35             35            Current assets                                       1,777          4,510         5,173          6,246
Adjusted Profit after tax                   301         1,195          2,106          3,455             Total assets                                         6,588        25,408         43,441        67,744


As % of assets                                                                                          Valuations
Y/E, Mar (Rs. m)                          FY09        FY10E          FY11E          FY12E               Y/E, Mar (Rs. m)                                     FY09         FY10E          FY11E         FY12E
Yield on assets                            19.4           23.5           22.0          22.0             Adjusted Profit after tax (Rs mn)                      301          1,195         2,106          3,455
Spreads                                      9.2          13.9           13.7          13.4             No of shares (mn)                                    106.3          170.0         381.0          381.0
NIM                                        14.8           16.6           16.0          16.0             FDEPS (Rs)                                              2.8            7.0            5.5            9.1
Other income                                 0.4            0.2           0.1            0.0            PER (x)                                                27.9          13.1           14.3             8.7
Net Income                                 15.1           16.8           16.0          16.0             Book value (Rs)                                        15.5          31.9           20.8           29.1
Operating expenses                           7.2            7.0           7.0            7.2            P/BV (Rs)                                               5.1            2.5            3.8            2.7
Preprovision profit                          7.6            9.5           8.8            8.7            Adjusted book value (Rs)                               14.5          32.0           20.5           29.0
Provisions                                   2.1            0.7           0.8            0.9            P/ABV (Rs)                                              5.5            2.5            3.9            2.7
Profit before tax                            5.5            9.1           8.0            7.9            P/PPP (x)                                              13.2            8.0            8.5            5.2
RoAA                                         3.6            5.8           5.2            5.2            RoE (%)                                                29.1          29.8           30.1           36.4
                                                                                                        Dividend yield (%)                                      2.7            3.8            3.8            3.8




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Emkay Research                 13 May 2010                                                                                                                                                                          3

				
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