Refinancing opportunities will aid loan growth of 18%-20% for IDFC, says Edelweiss
IDFC’s Q3FY13 net profit of Rs4.5 billion (up 18% year-on-year) was lower than Edelweiss’ estimate.
However, lending business’ core metrics were maintained and the difference was due to:
(a) lower principal gains;
(b) higher provisions as DCHL (Deccan Chronicle Holdings) exposure is provided to the extent required; and
(c) muted capital market related revenue.
Lending business came in steady with further 5 basis points NIM (net interest margin) surge to 4.1% and no fresh NPA (non-performing assets) accretion. Loan book came in flattish as disbursements were lower, while there were a few large repayments, according to Edelweiss.
Growth guidance continues at 15%-20% for FY13E (11% YTD). Edelweiss believes that refinancing opportunities will aid loan growth of 18%-20%, declining wholesale rates will support NIMs while provisioning cover of 1.7% of loans will keep credit cost under check. Edelweiss maintains a ‘BUY’ recommendation for the shares of IDFC on the stock exchange.
After 35% year-on-year loan growth in H1FY13, in Q3FY13 the book grew a tad slower at 22% to Rs541 billion as disbursements dropped more than 50% quarter-on-quarter.
The management of IDFC continues to maintain guidance as the pipeline is robust, though on a quarterly basis, growth can be sporadic. Growth does not necessarily indicate any major green field projects expansion or pick up in investment activities, but is more a function of refinancing demand. FY14 still hinges o n policy reforms, while refinancing can support the next 12-18 months.
IDFC continued to post a strong performance on asset quality front as headline numbers of GNPA/NNPA came in at 0.26%/0.12%. The company had Rs1.45 billion exposure to Deccan Chronicle, of which Rs1 billion has now been written off and maybe Rs0.1 billion provisioning might be done in Q4FY13.
The management indicated that absolute NPL (non-performing loan) is likely to increase from current low levels, but will be within manageable limits.
PVR’s net profit was below estimate, primarily due to higher depreciation in Q3FY13
PVR’s Q3FY13 revenue and EBITDA surpassed Edelweiss’ estimates; however, net profit was below estimate, primarily due to higher depreciation (up 43% year-on-year due to two new big properties in Orion Mall, Bengaluru, and Phoenix Market City, Kurla, Mumbai), high interest costs (up 77% year-on-year on high debt due to Cinemax acquisition) and higher tax rate (38.5%). These are the observations of Edelweiss analysts on the third quarter results of PVR in FY13.
Key positives were:
(a) huge 7% year-on-year jump in average ticket price (ATP) for comparable properties to Rs181;
(b) 37% year-on-year rise in footfalls;
(c) 13% year-on-year surge in spends per head to Rs49; and
(d) 18% year-on-year spurt in ad revenue.
Though Edelweiss expects PVR to benefit from Cinemax’s acquisition due to synergy benefits, it is fairly conservative in its estimates. Increased focus on being a lifestyle company augers well. Edelweiss maintains a ‘BUY’ recommendation for the share of PVR on the stock exchange.
Riding on higher ATP, 49% year-on-year increase in food and beverage revenue and 18% jump in ad revenue (like-to-like), PVR’s exhibition revenue grew a robust 46.2% year-on-year to Rs1,874 million. Rent expenses surged 60% year-on-year due to increase in screens and service tax provision on lease rentals of Rs34.5 million in Q3FY13. This, coupled with a 51% year-on-year increase in film distributors’ share and other movie related charges, led to 55 basis points year-on-year drop in EBITDA margin to 17%. In spite of EBITDA growth of 39% year-on-year, new profit grew just 1.4% year-on-year due to jump in interest and depreciation costs.
PVR added 47 screens in 9 months of FY13 and plans to add 102 screens in next eight months. Post the Cinemax deal, it will be the largest multiplex operator in India with more than 350 screens, well ahead of peers. Its consolidated debt as of date is Rs6 billion.
With 10 projects to get commissioned over the next 18 months and interest rates at a peak, Edelweiss believes that ITNL’s strong balance sheet makes it one of the best asset plays in the infra asset space
IL&FS Transportation Networks (ITNL) Q3FY13 profits were below expectation, despite sterling revenue growth, due to lower EPC margin. While revenue surged 39% year-on-year, indicating strong execution, higher share of low margin construction business dragged EBITDA margin down to 25%, according to Edelweiss Financial Services analysis of its Q3FY13 results.
Toll collection on most projects remained strong. Buoyed by robust execution, Edelweiss has revised up its revenue estimates 2% and 13% for FY13 and FY14, respectively. With 10 projects to get commissioned over the next 18 months and interest rates at peak, Edelweiss believes that ITNL’s strong balance sheet makes it one of the best asset plays in the infra asset space. Edelweiss maintains a ‘BUY’ recommendation on these shares in the stock exchange.
ITNL’s Q3FY13 topline at Rs17.6 billion (up 39% year-on-year) highlighted its strong execution capabilities. However, increase in contribution from low margin EPC business (69% against 65% of revenue in Q2FY13) led to EBITDA margin plunging 750 basis points sequentially (EPC EBITDA margin at about 17%, while about 80% for BOT division). While capital charges remained under control, higher tax rate at 37% led to PAT coming at Rs1.0 billion (up 19% year-on-year), lower than our estimate of Rs1.2 billion.
ITNL’s order book remains strong at Rs119 billion. Of this, 49% are NHAI projects, 28% non-NHAI road projects and balance non-road projects.
ITNL’s strong financials place it in an ideal position to benefit from declining competition for road BOT projects; it can win $1 billion worth of new projects every year without equity dilution. With 10 projects becoming operational over next 18 months, toll/ annuity collections are set for an upswing.