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HDFC Bank (Outperform)
CMP: Rs 489
Target: Rs 525
Total provisions of Rs 360 crore declined 19 per cent y-o-y and 20 per cent q-o-q. Specific loan provisions amounted to Rs 100 crore against Rs 190 crore in 1Q FY12. Slippages have remained low at Rs 400 crore or one per cent of lagged loans reflecting the bank's strong underwriting. Gross NPLs grew at an immaterial three per cent q-o-q. There has been slippage on restructured loans due to the MFI portfolio. The decline in NIMs is largely due to higher term deposit costs and decline in q-o-q CASA. While CASA deposits grew strongly at 6.5 per cent q-o-q, term deposits grew faster at 9.5 per cent q-o-q putting pressure on the CASA ratio. Term deposit growth was strong due to higher rates. CD ratio will remain high at 80 per cent due to the bank's excess capital which can be used to make new loans.
Torrent Pharma
(In Line)
CMP: Rs 581
Target: Rs 615
Key export markets registered healthy 24 per cent constant currency growth (32 per cent on reported basis). Brazil (35 per cent y-o-y) benefitted due to one-time inventory build-up while Heumann (13 per cent y-o-y) and US grew on back of product launches. Domestic business, however, remained under pressure and grew at a slower seven per cent y-o-y due to increased competition in key GI segment. TRP expects domestic business to grow at 15 per cent in 2H FY12 with growth of 15-18 per cent in FY13. Revise PT to Rs 615 (Rs 630 earlier) based on 14x one-year-forward EPS. Export sales growth in 2H FY12 will be difficult to maintain while India business growth will be crucial to growth including profits. Medium-term CRAM opportunities provide support to valuations.
Prabhudas Lilladher
Hindustan Zinc (Accumulate)
CMP: Rs 121
Target: Rs 147
Hindustan Zinc (HZ) reported better-than-expected results for the quarter on the back of lower than expected increase in energy costs and higher revenues in silver business. We remain positive on the stock given its strong earnings profile (RoE>22 per cent), attractive valuations and robust free cash flows. Management's move to high dividend pay-out policy would augur well for stock's performance. On the back of strong earnings quality, attractive valuations and robust cash flows, we continue to remain positive on the stock.
Dolat Capital
Indraprastha Gas (Buy)
CMP: Rs 398
Target: Rs 489
IGL clocked a volume of 3.34 MMSCMD in Q2 FY12. High gas cost and rupee depreciation affected profitability and gross spreads declined 7.3 per cent sequentially. Growth in PNG was mainly driven by the industrial segment and we expect it to remain strong. The aggressive expansion in PNG infrastructure will ensure volume growth momentum. CNG growth will be fuelled by private vehicles. The conversion is mainly driven by fuel economics and mushrooming filling stations. At CMP of Rs 398, the stock trades at 17.1x FY12E and 13.9x FY13E earnings.
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