Stock Views on VST Industries, IndusInd Bank

HSBC  on INDUSIND BANK


IndusInd's current management team has turned around the bank around in terms of loan growth, earnings growth and profitability; however, a good part of the benefits of these measures are likely to materialise over the next three years. The stock has been among the best performers year to date, almost doubling on an absolute basis and outperforming the Sensex by 77%. The key stock catalyst is likely to be continued robust expansion of CASA mix demonstrated in quarterly earnings releases. The key strength, weakness, opportunity, and threat, respectively, for IIB are the width and depth of the current management team with a solid track record over the last two years, the bank's relatively weak brand visibility, a high growth opportunity given IIB's low market share, and risks to CV demand.

INDIABULLS SECURITIES on VST INDUSTRIES


VST Industries has reported strong operating performance in its 2QFY11 results. Cigarettes volume grew by ~6% in 2QFY11, in line with ~5.5% volume growth in 1QFY11. Indiabulls Securities believe maintaining the volume growth trajectory is remarkable as the company had taken 20% price hike in 1QFY11. Indiabulls believe exports have grown 40% in 2QFY11 compared to 30% decline in 1QFY11. Operating profits for 1HFY11 grew 17.2% to 573mn, with margins almost stable at 20.09% in 1HFY11 against 20.16% in 1HFY10. Gross margins have improved by 297bps, benefiting from the 20% price hikes taken during the period. At current price, the stock offers 6% dividend yield, even with conservative estimates of PAT remaining flat at 750mn in FY11 against 745mn in FY10, assuming decline in other income from 333mn in FY10 to 250mn in FY11.