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Today’s View: POSITIVE

“SBI Numbers strong, quality weak: 4QFY08 PAT at Rs18.8b was higher v/s our estimates, on account of stronger NII and lower opex due to reversal of excess provision for employee benefits. NII grew 6% YoY and 13% QoQ to Rs48b. NII includes Rs3.8b of interest on tax refund. Adjusting for tax refund, NII has been flat YoY. In FY08, margins are lower by 35bp to 3.07%. In FY08, core fees have grown strong by 23%. Big disappointment was in asset quality, as gross NPAs increased to >3% and net NPA were at 1.8%. Delinquency has increased to 2.2% in FY08 v/s 1.9% in FY07.
Deposits increased by 23% to Rs5.4t (QoQ up 5%) while loans increased by 24% YoY to Rs4.2t (QoQ up 7%). Management guides for 25% growth in loans and 22% growth in deposits in FY08.
Gross NPAs increased 28% YoY and 21% QoQ in absolute amount. Net NPAs increased 41% YoY and 32% QoQ in absolute amount. Provision coverage ratio remains lower at 42%. NPA provisions increased 40% in FY08.

While margins are likely to remain stable (owing to the capital impact) and balance sheet growth at 20%, we expect NPA provisions to remain high for SBI considering the build-up in gross NPAs and its lower provision coverage ratio. Adjusted for SBI Life’s value at Rs192/share,
the stock trades at 1.5x FY09 consolidated BV and 1.3x FY10 consolidated BV..”
“BoI reported 26% NII growth in 4QFY08 to Rs12.2b, higher than our estimate of 16% growth. Net profit grew by 69% to Rs7.6b, significantly higher than our estimate (Rs4.5b) due to stronger core operating numbers, treasury profits and recoveries. Strong balance sheet growth (advances up 32%, deposits up 25%), stable margins (3% in FY08, 3.2% in 4QFY08), traction in fees (up 30%) and reduction in NPAs (net NPAs at 0.5%) are indicators of BoI’s superior performance across parameters.
Core fee income excluding forex grew by 31% YoY to Rs3.8 in 4QFY08 and ~30% in FY08. In line with our expectations, operating leverage is providing a boost to BoI’s profits in FY08.
We expect RoA to sustain at 1.1-1.2% over next two years for BoI and RoE to sustain at 22-23%. We believe BoI is one of the best managed PSU bank with focus on improving core operating profitability and shareholder returns. The stock trades at a P/E of 6.7x FY10E EPS and P/BV of 1.4x FY10E BV. .Buy for investments and trading. ”
“Maruti reported increase of 23.8% in April 2008 volumes to 62,336 units (higher than our est of 55,000 units).
- Domestic volume growth was 22.4% to 59,539 units, while exports increased 64.5% YoY to 2,797 units.
- Volume growth was driven by the A3 segment (+97.1% YoY) due to new launch DZire and low base of last year following discontinuance of Baleno. The A2 segment (+27.3% YoY) and the MPV segment (+25.9% YoY) also registered robust volume growth.
- We expect MSIL to register volume growth of 13.5% in FY09 (10% domestic volume growth and 60% export volume growth). At our existing estimates, we expect residual growth of 12.7% in FY09.
- The stock trades at 10.6x FY09E EPS of Rs70.2 and 9.1x FY10E EPS of Rs81.9. Buy for investments.”