Stock Views on HDFC BANK, GRUH FINANCE, DISH TV, BANK OF INDIA, SINTEX INDUSTRIES

JP MORGAN  on SINTEX INDUSTRIES


JP Morgan initiates coverage on Sintex Industries with an `Overweight' rating and a target price of Rs 435. Sintex is a leading player in India in plastics and is a market leader in prefab structures and monolithic construction segments. Government spending on rural infrastructure and mass housing is rising; budgets for primary education have increased at 46% CAGR over the past 10 years, while those for mass housing has increased at a CAGR of 20% over the past five years. Sintex's leadership position, innovative product offerings, and strong execution should allow it to capture a larger share of this spend. The price target is based on 12x FY12E P/E, in line with its historic trading average. The stock currently trades at 9.7x FY11E and 8.2x FY12 P/Es, which are attractive valuations. The current stock valuations reflect excessive caution on earnings recovery and skepticism on overseas acquisitions.

IIFL  on BANK OF INDIA


IIFL recommends `Buy' rating on Bank of India with a target price of Rs392. High levels of NPLs (non-performing loans) had been the key worry for the past few quarters. With stringent provisioning norms and strong recovery mechanism in place, the management has guided for limited accretion in NPL. Moreover, with renewed focus on increasing CASA (current account savings account) proportion, improving margins, 400+ branch addition and diversification in loan portfolio, the bank is entering the next league of growth. Net NPLs were up 2.5x y-o-y to Rs 2,210 crore largely on account of significant rise in slippages. With the pace of accretion of restructured loans having slowed down, minimal loans are to come up for restructuring. With sturdy 23% CAGR in loans over FY10-12E, the bank is to witness a 21% CAGR in balance sheet. Return ratios, too, are set to improve with average RoE at about 18-19% levels and RoA at 0.8% over the said period.

CITIGROUP on DISH TV


Citigroup reiterates `Buy' rating on Dish TV. Dish TV recently announced its launch of high definition (HD) service - 'Dish Tru HD, targetting a premium subscriber base. In the Q4FY10 results conference call, management mentioned that the HD market in India is in its infancy with only 2000 subscribers. Citigroup believes for HD to succeed, it is important that the entire value chain is in place, i.e. a) broadcasters should be able to offer content using the technology, b) the consumers should also have HD-ready TV sets, and, c) ready cable/satellite distribution support. Currently, only about 5-6 channels have content in HD format and only about 22.5 lakh HD enabled TV sets in the market. The HD pricing would be at about 70% premium to regular subscribers. The stock has outperformed the broad market by about 7% in the last month, and this trend is to continue. Dish TV is well placed to benefit from the rapid DTH market growth. Citigroup forecasts a strong about 26% and about 150% revenue and EBITDA growth respectively over FY10-12E.

LKP SECURITIES on GRUH FINANCE

LKP Securities recommends a `Buy' rating on Gruh Finance (GFL) with a price target of Rs 345. Backed by an underleveraged balance sheet and equity support from the promoter, GFL presents a case for higher growth. Higher operational and credit costs in rural regions have led most aggressive banks and NBFCs to focus on urban and metro regions. GFL has a strong network to service the under penetrated markets and is compensated by high asset yields. Local knowledge and experience on buyer behaviour keeps NPAs low, translating to higher RoEs of 28%. As asset book expands through broadening of customer and geographic diversification, pricing power and lower operational costs translate to greater traction in NII (net interest income). Loan book expansion, higher profitability (RoE of 29% FY12) and proven track record to tide over adverse interest rate cycles reaffirm LKP's belief in GFL.

JP MORGAN on HDFC BANK


JP Morgan maintains `Overweight' rating on HDFC Bank and increases the price target to Rs 2,300. The bank has been able to hold margins despite derisking the book. The resultant credit cost advantage is expected to drive a significant RoA improvement, which is not in the price. There could be pressure from more expensive savings bank deposits and increasing leverage. HDFC Bank's ability to return to FY08 margins despite de-risking the book, is an earnings driver for the next two years. Corporate demand is also robust, especially with the one-time spike from the telecom sector. HDFC Bank continues to target core loan growth, a few percentage points above systemic growth; there could be some spikes from short-term opportunities. The core loan mix is likely to remain stable. JP Morgan believes premium valuations are justified, given significant improvement expected in RoA and higher loan growth and lower credit costs could surprise on the upside.