ING Vysya Bank : BUY

Impressive Performance With Strong Set of Nos

ING Vysya Bank’s (ING) PAT grew 91% YoY to Rs 91.3 cr, which was above our estimates. Improvement in NIMs (3.3% in Q4FY11, up 20 bps QoQ); strong growth in CASA balances (34.6% in Q4FY11, up 116 bps QoQ) along with improved asset quality (Gross NPA at 2.3%  in  Q4FY11,  down  36  bps  QoQ)  drove  this  robust  operating performance. Decline in provision expenses (down 96% YoY) provided traction to PAT growth.

Key highlights

• NIMs grew 20 bps to 3.3% in Q4FY11 led by yield on advances improving to 10.69% (up 56 bps QoQ) along with an improvement in CASA ratio. Cost of deposits rose to 6% (up 56 bps QoQ).
• Advances grew 28% YoY to Rs 23,600 cr buoyed by a 43% YoY rise in biz banking. CASA ratio improved to 34.6% (up 120 bps QoQ) with current a/c balance up 25% YoY & savings a/c balance up 23% YoY.
• High staff expenses (up 54% YoY) led to 13% QoQ increase in cost-to-income (C-I) ratio to 67%. ING has fully provided for: (a) the entire Gratuity liability (of Rs 20.74 cr), (b) Additional liability of pension for retired employees (of Rs 28.73 cr), and (c) 1/5th of Pension costs for existing employees (of Rs 18.6 cr). Only Pension cost on existing employees will be repeated going forward.
• Asset Quality improved as gross NPAs and Net NPAs declined by 5% QoQ and 33% QoQ to Rs 550 cr and Rs 90 cr respectively. Provision coverage improved further to 83%.

Maintain BUY, with TP of Rs 434 (24% upside)

ING is expected to witness substantial improvement in C-I ratio as some of the one-off items will not be repeated, which will help ING achieve over 1% RoA in FY12E (vs. 0.9% in FY11). Higher-thanmandated PCR will help in normalizing earnings in bad qtrs. With asset quality issues behind & with opening of new branches, ING’s focus will be on growth which will augur well for return ratios. We have revised our earnings upwards by 7% to factor in improved operational performance. At CMP of Rs 350, ING is trading at 11.5xFY12E EPS of Rs 30 & 1.38xFY12E ABV of Rs 253. BUY rating with an TP at Rs 434.

28th April, 2011

The markets opened on a positive note and witnessed volatility in the morning trade post which they continued to trade sideways till the afternoon session. The markets moved lower in the afternoon session and again witnessed volatility before ending on a weak note.  Among the Sectoral indices PSU & FMCG gained while Realty and Capital Goods were among the losers. In the Sensex kitty ONGC (2.57%), M&M (1.61%) & Maruti Suzuki (1.10%) were amongst the gainers while Wipro (2.86%), Jaiprakash Asso (2.26%) and BHEL(2.30%) were among the losers. The Sensex lost 97 points or 0.49% to close at 19,449 while Nifty lost 35 points or 0.59% to close at 5,834.

Total traded turnover stood at Rs 1,98,744 cr. In equities FIIs were net sellers of (Rs 711 cr) while DIIs were net buyers (Rs 299 cr). On the derivatives side, FIIs were net sellers in Index Futures (Rs 385 cr), Stock Futures (Rs 407cr), Stock Options (Rs 24 cr) while they were net buyers in Index Options (Rs 490 cr).

The US markets ended positive as stocks rallied after Fed renewed it commitment to stimulate growth with low rates and stated that increase in inflation is likely to be temporary. The Dow Jones gained 96 points or 0.76% to close at 12,691 while NASDAQ gained 22 points or 0.78% to close at 2,870.

The Asian markets are trading positive. Nikkei is trading higher by 1.28% while Hang Seng is trading higher by 0.57%.

The markets closed on a weak note after witnessing volatility. The market breadth was negative with declines outnumbering the advances. The markets may open on a positive note tracking global cues and may remain volatile due to F & O expiry today.

The trend deciding level for the day is 5850, If NIFTY trades above this level then we may witness a further rally up to 5875‐5900‐5930 levels. However, if NIFTY spot trades below 5850 levels then we may see some profit booking to initiate in market, it may correct up to 5805‐5775‐5745.

Container Corporation : HOLD

Muted Volume Growth Mars Profitability

Container Corporation’s (Concor) Q4 operating performance was below expectations, with a 617 bps QoQ decline in EXIM margin to 24.6%, due to: a) volumes remaining flat QoQ (despite port volumes being up 4%); b) volume discounts (typically a Q4 event); and c) only ~30% of the rail haulage hike (of 4%) has been passed. Domestic ops (22%  of  revs)  continued  to  be  negatively  impacted  by  the  ~50-200% hike in rail haulage charges on 9 commodities in Dec’10, with 4% volume decline and subdued margins of 8.4% in Q4 (vs. 11.4% in Q3FY11). The mgmt has lowered its FY12E guidance to 10% revenue and profit growth.

Key highlights

• EXIM volumes flat QoQ (µ 5.6% YoY) to 0.52 mn TEUs in Q4FY11:  Concor’s  EXIM  volumes  for  FY11  grew  by  7%,  lower than the port volume growth of 10% – on account of a decline in rail throughput from JN Port (due to de-stuffing activity at port itself). FY11 realizations were 3.5% lower, mainly on account of shift in traffic from JNPT to Mundra and Pipavav (JNPT handling has fallen to 64% in FY11 vs. 74% in FY10), which has resulted in ~6% decline in lead distances to 1,109 kms.  We have factored in vol growth of 10% and 8.5% for FY12E & FY13E resp.
• Dom. volumes fell by 4% QoQ and 9% YoY to 0.14 mn TEUs in Q4:  Domestic  vol  growth  in  FY11  has  been  1%  (which  would have been ~7.5% in absence of the Dec’10 rail haulage hike). With higher empty running due to non-availability of certain commodities, EBIT margin for the year has declined to 10.8% (vs. 14% in FY10). The mgmt is in talks with railway ministry for the review of the policy; however, in the near term, dom ops are likely to remain weak. We have factored in vol growth of 4% and 10% for FY12E & FY13E resp.
• Of  the  4%  rise  in  rail  haulage  charges  on  both  EXIM  and  domestic  leg  w.e.f.  Jan 1st, the co. has been able to pass on ~30% (vs. 50% guided earlier).  
• Capex: Concor intends to spend Rs 700 cr in FY12E of which ~Rs 420 cr is towards wagon addition (~20 rakes likely to be added vs. 240 currently), while the rest is towards terminal development and setting up of logistics parks. While one of the logistics parks at Ahmedabad has just commenced operations, the second one at Andhra Pradesh is likely to come on stream in the next 3-4 months. 
• Fresh and Healthy (FHEL, fully owned subsidiary) has achieved PAT breakeven in FY11 (vs. loss of Rs 9.1 cr in FY10). The co. is targeting revenues of  ~Rs 90 cr in FY12E, with increased profitability.

Stock fully priced in; Maintain HOLD

We are reducing our FY12E EPS by 5% to Rs 71 on account of the near-term concerns on domestic ops and structural decline in lead distances. We maintain a HOLD rating on the stock, with a revised TP of Rs 1,213 (vs. 1,265 earlier), based on 17x FY12E EPS.