A n o t h e r d u l l q u a r t e r …
Reliance Capital reported a better performance at the individual
subsidiary level with AMC & consumer finance reporting strong numbers
but continued its lower profitability trend in consolidated PAT, declining
70% YoY and flat sequentially to | 33.4 crore due to higher interest costs.
General insurance continued losses with Q2FY12 loss at | 28 crore.
Total income increased 17.6% YoY and 2.5% QoQ to |1529 crore.
Successful completion of a 26% stake sale to Nippon Life has happened
and funds of | 3100 crore were realised in October 2011. Hence, they
were not reflected in Q2FY12 results. Q3FY12 results will incorporate
capital gains from the same. We re-iterate our BUY rating on the stock.
ƒ Asset management business remained the highlight with AUM
declining 13% YoY to | 93100 crore and PBT decreased 8% to |
65.6 crore. Focus on retail long-term debt continues and the PBT
margin was at 40% in Q2FY12 from 42% in Q1FY12. We expect
AUM growth to remain sluggish for FY12 due to uncertain market
conditions. We have lowered our 10% increase in AUM assumption
to flat and revised AMC value per share to | 190 from | 206 earlier.
ƒ Finance book reported lower PBT of | 54.7 crore and grew 39% YoY
to | 13900 crore, sequential net increase of just | 900 crore.
However, higher borrowing cost led to NIM declining from 5.3% to
4.1% YoY (4.3% Q1FY12). NII grew 8.2% YoY and remained flat
sequentially. The management expects about | 2700 crore of high
cost funds to mature, helping cost of funds to decline. We expect
loan growth to be around 30% for FY12E to | 15990 crore.
ƒ Life insurance, brokerages show sequentially flat performance…
Life insurance generated PBT of | 8.2 crore against | 7.9 crore in
Q1FY12. The broking and distribution businesses together reported
a dismal | 4.3 crore PBT on a topline of | 55.8 crore.
V a l u a t i o n
Capital gains from Nippon Life deal boosting FY12E PAT and expected
dilution of AMC stake also to Nippon will remain key triggers in coming
months. We have revised AMC and consumer finance valuation
downwards and, hence, reduced our SOTP target to | 546 from |579.
Reliance Capital reported a better performance at the individual
subsidiary level with AMC & consumer finance reporting strong numbers
but continued its lower profitability trend in consolidated PAT, declining
70% YoY and flat sequentially to | 33.4 crore due to higher interest costs.
General insurance continued losses with Q2FY12 loss at | 28 crore.
Total income increased 17.6% YoY and 2.5% QoQ to |1529 crore.
Successful completion of a 26% stake sale to Nippon Life has happened
and funds of | 3100 crore were realised in October 2011. Hence, they
were not reflected in Q2FY12 results. Q3FY12 results will incorporate
capital gains from the same. We re-iterate our BUY rating on the stock.
ƒ Asset management business remained the highlight with AUM
declining 13% YoY to | 93100 crore and PBT decreased 8% to |
65.6 crore. Focus on retail long-term debt continues and the PBT
margin was at 40% in Q2FY12 from 42% in Q1FY12. We expect
AUM growth to remain sluggish for FY12 due to uncertain market
conditions. We have lowered our 10% increase in AUM assumption
to flat and revised AMC value per share to | 190 from | 206 earlier.
ƒ Finance book reported lower PBT of | 54.7 crore and grew 39% YoY
to | 13900 crore, sequential net increase of just | 900 crore.
However, higher borrowing cost led to NIM declining from 5.3% to
4.1% YoY (4.3% Q1FY12). NII grew 8.2% YoY and remained flat
sequentially. The management expects about | 2700 crore of high
cost funds to mature, helping cost of funds to decline. We expect
loan growth to be around 30% for FY12E to | 15990 crore.
ƒ Life insurance, brokerages show sequentially flat performance…
Life insurance generated PBT of | 8.2 crore against | 7.9 crore in
Q1FY12. The broking and distribution businesses together reported
a dismal | 4.3 crore PBT on a topline of | 55.8 crore.
V a l u a t i o n
Capital gains from Nippon Life deal boosting FY12E PAT and expected
dilution of AMC stake also to Nippon will remain key triggers in coming
months. We have revised AMC and consumer finance valuation
downwards and, hence, reduced our SOTP target to | 546 from |579.
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