*Trading Idea/Technical Outlook: IIB*
*LTP: 1221*
*
*
*Sell on rise around 1235-1245 OR 1285-1295;*
*
*
*TGT: 1195*-1180-1160-1140*-1125-1105-1090-1074-1040-1020* (1-3/6M)*
*
*
*TSL> 1265 OR > 1305*
*Note:* Consecutive closing (3 days) above 1265, IIB may further rally
towards 1265-1295 zone, which may again turn out to be a strong supply
zone for the stock and *sustaining above 1305 area for any reasons, it
may further rally up to 1320-1355* & 1375*-1400 zone in the mid to long
term (alternative bullish case scenario).*
Traders/investors having long position in the counter, may also watch
1195*-1180 area as the nearest positional support zone.
For an investing point of view, buy on dips strategy around 1090-1020
area may be good, considering the overall market volatility.
Recent price action may be indicating that most of the "good news" is
already discounted by the market to a large extent and fresh break out
will only come above 1265 zone, if today's Q2FY17 result and management
commentary come well above market expectations.
*Fundamental Outlook:*
Q1FY17 EPS: 10.64 (Diluted)
Projected Q2FY17 EPS: 11.00
Market consensus: 11.65
FY16 TTM EPS: 39.26 (Actual)
Q1FY17 TTM EPS: 40.05 (Actual)
Projected Q2FY17 TTM EPS: 41.65
Projected FY17 EPS: 45.50 (consensus 49.50)
Average PE: 24 (current PE 30.50; industry average PE 20)
*Intrinsic/fair valuation : 965 (Q1FY17 TTM EPS)*
*
*
*Projected fair value: 1000-1015 (Projected Q2FY17 TTM EPS)*
*
*
*Projected fair value for FY-17: 1095-1190 (Estimated FY17 EPS)*
IIB will publish its Q2FY17 result today and analysts are expecting it
to report:
PAT: 700.80 cr (+6% on QOQ & +25.1% on YOY)
NIM: 1417.6 cr (+4.5% QOQ; +29.5% YOY)
NIM(%): 3.8-3.9% (expected to be stable around 4% in FY17 onwards; 72%
of the loan book is at fixed rate; decline in cost of funds and high
yielding diamond financing portfolio acquisition from RBS; concern is
any stress in retail loans and Diamond/James & Jewelry portfolio).
Credit growth: 29%
Deposit growth: 31%
Non-Interest income: +30%
OPEX: +30% (continued branch expansion and investment in digital
banking; FY117 target is 1200 branch from the Q1 level of around 1000).
But, some analysts are also concerned over reported 50% YOY increase in
absolute provisions (NPA/NPL) in Q1FY17 and thus asset quality may be
the prime concern for it.
Traditionally, IIB is maintaining 30% CAGR in revenue being a new
generation & well managed private bank for the last few years. But, due
to unfavourable base effect and competition from the new entrants (like
Bandhan Bank in the NE area), PSBS and the likes of HDFC/ICICI/Axis
Banks (which are now quite active in retail banking space due to stress
in corporate portfolio), it may be very difficult for the IIB to
maintain an evergreen 30% growth story in the years ahead.
As CV/Consumer financing business is going for some types of
saturation/stress, IIB now increasingly focusing on secured & unsecured
personal loans, specially credit cards & LAP and basically targeting the
same sets of "prime clients", who has multiple personal loans/credit
cards courtesy the other private banks. The same is true for the MSME
sector.Thus, going forward, 20% CAGR may be "new normal" for the IIB.
So, high leveraged retail clients may also be some cause of headwinds
for the IIB as well as for the other Pvt banks.
We may see some moderation in the growth of "other fees" income (cross
sales) because of the saturation factor. The bank is now relying more on
"trading income".
Present corporate/retail loan ratio for IIB is around 52:48 and the bank
is planning to shift it to 50:50 by FY18. Going ahead, the bank may give
more focus on small corporates (MSME) loan portfolio for better margin
and other modes of business banking. Presently MSME has 12% share for
the overall corporate loan book of IIB, while large & mid size
corporates has 29% & 18% share.
No doubt. IIB is a great story in the new generation Pvt banking space,
but considering the recent price action most of the above sets of "good
news" may be already priced in as the scrip surged by over 55% in the
last 8 months (Feb'16 low). So, buy on dips strategy (accumulation at
every major dips) may be good for a healthy portfolio return rather than
chasing the rally.
*Analytical Charts:*
<https://2.bp.blogspot.com/-OzSIaUJWb4s/V_2xw38K46I/AAAAAAAAJGM/Qy96gmNDIicx_Yi5SbIIjlW862mj-FMDQCEw/s1600/IIB-DAILY-10-12-2016.png>
<https://2.bp.blogspot.com/-QNnUtayXF2I/V_2x7HR9mMI/AAAAAAAAJFs/mlxPUOvvLjodfT2FPFxHpY4ubADJm-GkwCEw/s1600/IIB-FIBB-10-12-2016.png>
<https://1.bp.blogspot.com/-6b6GWwTnXAw/V_2x-0aVbSI/AAAAAAAAJF0/G_7rl8_WV_wWQsNKCDJeIoJMSiVngYX1gCEw/s1600/IIB-WK-10-12-2016.png>
<https://1.bp.blogspot.com/-40yjir1D_hs/V_2yD1yHSgI/AAAAAAAAJF8/d5CLdSLLY5MMTIKzWtCuRny-ndjMCbLigCEw/s1600/IIB-TL-10-10-2016.png>
<https://3.bp.blogspot.com/-FGKwDAuGDqA/V_2yJhMxDdI/AAAAAAAAJGA/vdQSyvthzoUxoatl7TwcsfVveDQ-00SNQCEw/s1600/IIB-PATTERN-10-10-2016.png>
<https://3.bp.blogspot.com/-HVUo4mq75ec/V_2yN0WtdDI/AAAAAAAAJGI/FD2XcSIvD_49bWABkvDi_7eEYQFWXQSKgCEw/s1600/IIB-TL-MT-10-10-2016.png>
--
Thanks & Regards,
Asis Ghosh
--
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