Investor's Eye: Update - Yes Bank, Supreme Industries

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Investor's Eye [April 23, 2014]  Sharekhan www.sharekhan.com

Summary of Contents   STOCK UPDATE   Yes Bank Recommendation: Buy Price target: Rs512 Current market price: Rs442   Earnings growth remains strong, price target revised to Rs512   Result highlights Yes Bank reported a net profit of Rs430 crore in Q4FY2014 (up 19% YoY) which was supported by a 17.4% Y-o-Y growth in the non-interest income and a decline in the provisions (down 26% YoY). The NII growth was relatively slower (up 13% YoY) though the margin increased by 10BPS QoQ to 3%. The asset quality improved on a sequential basis and there were no fresh additions to the restructured loans. Despite the macro challenges, the management is confident of maintaining the asset quality and credit costs. The bank plans to raise the capital if the macro-economic environment improves (capital is sufficient for about 20% growth in the advances planned for FY2015). The improvement in the liability profile has sustained and the proportion of retail loans and retail fees is picking up. We upgrade our estimates for FY2014 and FY2015 on account of an improved visibility on the growth and asset quality. We estimate the bank's earnings to grow at a CAGR of about 18% over FY2014-16 resulting in a RoAs of 1.5%. We maintain our Buy rating with a revised price target of Rs512 (1.7x FY2016 book value).       Supreme Industries Recommendation: Buy Price target: Rs550 Current market price: Rs481   Weak Q3 but better growth outlook ahead   Result highlights In Q3FY2014 Supreme Industries (Supreme) reported a consolidated revenue growth of 10% largely supported by higher realisations in the plastics business (though volumes declined by 3%). The operating profit declined by 4.3% owing to an absence of a contribution from real estate sales during the quarter. Consequently, the adjusted net profit dented by 18.5% YoY (due to a higher interest outgo and effective tax rate).  The management expects a 6% volume growth in the full year FY2014 (June ended fiscal), which implies a very strong growth of 20% plus in Q4FY2014. Also, it expects to book sales of Rs21.7 crore in Q4FY2014 from the real estate division. For the next fiscal, the management is confident of a healthy 12% growth in the volumes and a 20% growth in the revenues in the plastics business. The guidance for the next year does not include the incremental business from the supply of composite LPG cylinders. In our estimates, we have factored a volume growth of 4% for FY2014 and 10% for FY2015.  Taking into account the Q3FY2014 results, we have tweaked our estimates. However, we retain our positive view on the back of a pick-up of the volume growth in Q4FY2014 (April-June quarter) and FY2015. Further, the incremental volumes from the composite cylinder segment would act as a key growth driver (executing the first order of 50,000 cylinders in Q1FY2015). Therefore, we maintain our Buy rating with a price target of Rs550.   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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