Occasional hedging by buying options or shorting index futures.
Investment rationale on every idea is provided.
10% in a particular Stock and 30% (max) in a Sector.
Cash holding based on market direction call. Cash to be deployed in case of sharp market fall.
Cash holding to earn notional interest income of 4% p.a.
RBL BANK
CMP 500 TGT 690
Recent correction is an opportunity to accumulate quality stocks like RBL Bank.
RBI’s pause in hiking interest rates on pretext of benign inflation augurs well for upcoming banks like RBL.
RBL has been on a robust growth trajectory consistently maintaining growth in advances & profit in excess of 30%.
Healthy deposit to advances ratio was a key enabler in improving NIM to 4.04% in Q1FY19 up from 3.54% in Q1FY18.
Management has demonstrated consistent improvement in operational efficiency and cost to income ratio while embarking on a high growth trajectory through capturing quality business.
Sound asset quality which improved in Q1FY19 having GNPA at 1.40% (1.46% in Q1FY18) and net NPA at 0.75% (0.81% in Q1FY18). Going forward we expect RBL’s asset quality to remain firm.
Strong and improving financials amidst scenario of rising competition & higher cost of funds sets it apart from most of its peers. It reported ROA at 1.26% and ROE of 11.16% in Q1FY19 having provision coverage ratio of 60.41% (57.99% in Q1FY18) while registering decline in both Gross and Net NPA.
It has well diversified business mix and has been increasing geographical footprint steadily. Given, its present size and aggression of management it has long way to go before its high growth trajectory tapers off.
The book value has compounded in excess of 27% for last three years. In a rising cost of funds scenario and challenged macro environment this bank becomes a strong candidate for re-rating on back of its robust performance.
On a conservative basis, we expect 20% CAGR on book value for next couple of years, which for FY20e is likely to be Rs. 230, valuing it at 3.0x P/BV (FY20e) per shares target price comes at Rs. 691, leaving a scope of 39% upside from current levels.
About the Company: RBL Bank is one of India’s fastest growing private sector banks with an expanding presence across the country. The Bank offers specialized services under six business verticals namely: Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Retail Assets, Development Banking and Financial Inclusion, Treasury and Financial Markets Operations. It currently services over 4.9 million customers.
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document. This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh Kant Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time. Research Analyst has not served as an officer, director or employee of Subject Company One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)
Posted by Mehul Kothari | Published on 28-NOV-2019
Ujjivan Small Finance Bank Cutting its teeth, turning around
Going public to fulfil regulatory requirements: Ujjivan Small Finance Bank (UJVNSFB) is floating its stock to meet the regulatory requirements of going public within three years of commencing business, which it completes in Jan’20. The bank has to reduce promoter (holding company Ujjivan Financial Services or UJJIVAN) shareholding to 40% within five years of commencing business. The IPO shall help UJVNSFB to dilute UJVN shareholding by ~17%. The bank will have to further reduce UJJIVAN shareholding by 44% by Jan’22, a steep task if RBI disallows the reverse merger alibi. How UJVNSFB negotiates this challenge remains to be seen. Multiple strategies to drive business growth: UJVNSFB is transitioning from its earlier avatar of a microfinance company into a small finance bank. In the initial three years of its existence, the bank has added multiple products to its portfolio and its current offerings range from microfinance to small business loans (refer Exhibit 6 on pp. 2). The bank’s strategy is to further diversify its product offerings within retail and MSE segments, which it has identified as key areas of growth. On technology front, the bank has moved from physical to assisted digital and is now on the cusp of launching its own API. With a strong physical infrastructure already in place with 552 banking outlets, UJVNSFB is well placed to drive growth. Some hits and misses on earnings: Although UJVNSFB’s NIMs are amongst the best in the peer set, its return ratios were affected due to steep credit cost post demonetisation. The bank has recovered out of the asset quality shock and has now the best coverage ratio on NPAs in the peerset. UJVNSFB’s H1FY20 reported net profit of Rs1.9bn is ~2x FY19 net profit Rs900mn driven both by stable credit costs but more importantly by robust core earnings. With calculated H1FY20 RoAs already at 2.8% (ann.), UJVNSFB appears to have turned around for the better.Valuation: Based on our proforma estimates, UJVNSFB IPO is priced at ~2.0x FY21E book value. We arrive at the FY21E BV by adding to the networth a) pre-IPO and IPO proceeds Rs10bn, b) annualising H1FY20 net profit for FY20E, c) and assuming a 25%YoY growth in profit in FY21E. On a post-money basis UJVNSFB implies a market capitalisation of Rs63bn. There is no comparative valuation for UJVNSFB given the varying return metrics and therefore the significantly broad range of valuation multiples for AUBANK and EQUITAS. Based on a baseline ROA assumption of 2% and CoE of 13.5%, UJVNSFBs fair value is placed in the Rs35-40 range. We therefore believe UJVNSFB will have to deliver significantly better RoAs for the stock to generate upside. For a comparison of return metrics, see Exhibit 4 on pp. 2. Our 25%YoY profit growth in FY21E implies 1.75% RoA.Key risks: UJVNSFB has disclosed in the RHP some of the red flags raised by RBI regarding risk management as well as product offerings. Such operational risks if not redressed could attract regulatory sanctions on business.
Disclaimer: This report has been prepared by IndiaNivesh Securities Limited (“INSL”) and published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. The projections and the forecasts described in this report are based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based will not materialize or will vary significantly from actual results and such variations will likely increase over the period of time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently. None of the forecasts were prepared with a view towards compliance with published guidelines or generally accepted accounting principles.This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into account the particular investment objective, financial situation or needs of individual clients. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their own investment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. INSL does not take any responsibility thereof. Any such recipient shall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investors may realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection.Except for the historical information contained herein, statements in this report, which contain words such as ‘will’, ‘would’, etc., and similar expressions or variations of such words may constitute ‘forward-looking statements’. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements are not predictions and may be subject to change without notice. INSL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. INSL accepts no liabilities for any loss or damage of any kind arising out of use of this report.This report has been prepared by INSL based upon the information available in the public domain and other public sources believed to be reliable. Though utmost care has been taken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by INSL that such information is accurate or complete and/or is independently verified. The contents of this report represent the assumptions and projections of INSL and INSL does not guarantee the accuracy or reliability of any projection, assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report. This report may not be followed by any specific event update/ follow-up.Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter;
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.)
Posted by Mehul Kothari | Published on 03-DEC-2019
Investment Norms: INR 10 Lakhs (Model Corpus)
Maximum Stocks Open: 10
Target Investment Horizon: 6 Months
Occasional hedging by buying options or shorting index futures.
Investment rationale on every idea is provided.
10% in a particular Stock and 30% (max) in a Sector.
Cash holding based on market direction call. Cash to be deployed in case of sharp market fall.
Cash holding to earn notional interest income of 4% p.a.
STOCKS RATIONALE
NBCCCMP 53 TGT 77
NBCC is a big beneficiary of Infrastructure and housing for all (affordable housing) thrust by government in concurrence with improving rural and semi-urban economy.
Its standing order book has swollen above INR 80,000 crore at an healthy annual run rate. For FY19 so far it has received INR 6,000 crore, worth of orders.
In FY18 it registered a top line of around INR 7100 crore, net profit of INR 372 crore & cash profit of around INR 550 crore. Book to bill ratio stands at 11.5x and order book to sales at 8.5x which gives revenue visibility for next 10 years at constant top line based on FY18.
It is insulated largely from rising input costs as primary business is Project Management Consultancy (PMC) driven by asset light business model. PMC contributes around 90% to top line & almost 100% to bottom after covering costs of other business forays.
It has recently forayed into Real Estate with an eye on affordable housing, housing re-development projects and building of new townships.
Strong financials and steady cash flow is an added advantage. Cash per share in books as of FY18 stands at Rs. 13.75. Topline CAGR stands at 15% and PAT at 10% for last five years.
We expect execution to pick up steam on existing order book, delivering earnings CAGR of over 20% in next two years; which translates into an EPS of Rs.3.88 for FY20e. The stock is currently trading at a PER of 13.66x based on EPS estimate for FY20e.
Rock solid debt free balance sheet, proven execution capability, return ratios in high teens, makes it a compelling buy in light of steep stock price correction.
Valuing the company at a PER of 20x based on FY20e, per share price comes at INR 77.60, leaving a scope of 45% potential upside from current levels. We recommend accumulating NBCC.
About the Company: NBCC is into Project Management Consultancy (PMC), Engineering Procurement & Construction (EPC) and Real Estate (RE). PMC being is chief revenue contributor. Company's PMC business segment includes management and consultancy services for a range of Civil Construction Projects including Residential and Commercial Complexes, Re-development of Colonies, Hospitals, Educational Institutions, Infrastructure Works for Security Personnel, Border Fencing as well as Infrastructure Projects such as Roads, Water Supply Systems, Storm Water Drainage Systems, Water Storage Solutions and Solid Waste Management Schemes at different towns all over India. Majorly orders comes from various ministries of Central & State Governments. Some of the mega projects done by NBCC are World Trade Centre at New Delhi and International Exhibition-cumConvention Centre at Pragati Maidan.
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document.This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis reportEach of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh KantFollowing table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.Research Analyst has not served as an officer, director or employee of Subject CompanyOne year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart))
RBL Bank – Nivesh Velocity Portfolio
Investment Norms: INR 10 Lakhs (Model Corpus)
RBL BANK
CMP 500 TGT 690
About the Company: RBL Bank is one of India’s fastest growing private sector banks with an expanding presence across the country. The Bank offers specialized services under six business verticals namely: Corporate & Institutional Banking, Commercial Banking, Branch & Business Banking, Retail Assets, Development Banking and Financial Inclusion, Treasury and Financial Markets Operations. It currently services over 4.9 million customers.
Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold.
Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, employees and affiliates. INSL researches, aggregates and faithfully reproduces information available in public domain and other sources, considered to be reliable and makes them available for the recipient, though its accuracy or completeness has not been verified by INSL independently and cannot be guaranteed. The third party research material included in this document does not represent the views of INSL and/or its officers, employees and the recipient must exercise independent judgement with regard to such content. This document has been published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is not to be altered, transmitted, reproduced, copied, redistributed, uploaded or published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document.
This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report
Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh Kant
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.
Research Analyst has not served as an officer, director or employee of Subject Company
One year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart)
Previous Story
Ujjivan Small Finance Bank IPO - Issue Details, Balance Sheet & Company Highlights
Ujjivan Small Finance Bank Cutting its teeth, turning around Going public to fulfil regulatory requirements: Ujjivan Small Finance Bank (UJVNSFB) is floating its stock to meet the regulatory requirements of going public within three years of commencing business, which it completes in Jan’20. The bank has to reduce promoter (holding company Ujjivan Financial Services or UJJIVAN) shareholding to 40% within five years of commencing business. The IPO shall help UJVNSFB to dilute UJVN shareholding by ~17%. The bank will have to further reduce UJJIVAN shareholding by 44% by Jan’22, a steep task if RBI disallows the reverse merger alibi. How UJVNSFB negotiates this challenge remains to be seen. Multiple strategies to drive business growth: UJVNSFB is transitioning from its earlier avatar of a microfinance company into a small finance bank. In the initial three years of its existence, the bank has added multiple products to its portfolio and its current offerings range from microfinance to small business loans (refer Exhibit 6 on pp. 2). The bank’s strategy is to further diversify its product offerings within retail and MSE segments, which it has identified as key areas of growth. On technology front, the bank has moved from physical to assisted digital and is now on the cusp of launching its own API. With a strong physical infrastructure already in place with 552 banking outlets, UJVNSFB is well placed to drive growth. Some hits and misses on earnings: Although UJVNSFB’s NIMs are amongst the best in the peer set, its return ratios were affected due to steep credit cost post demonetisation. The bank has recovered out of the asset quality shock and has now the best coverage ratio on NPAs in the peerset. UJVNSFB’s H1FY20 reported net profit of Rs1.9bn is ~2x FY19 net profit Rs900mn driven both by stable credit costs but more importantly by robust core earnings. With calculated H1FY20 RoAs already at 2.8% (ann.), UJVNSFB appears to have turned around for the better.Valuation: Based on our proforma estimates, UJVNSFB IPO is priced at ~2.0x FY21E book value. We arrive at the FY21E BV by adding to the networth a) pre-IPO and IPO proceeds Rs10bn, b) annualising H1FY20 net profit for FY20E, c) and assuming a 25%YoY growth in profit in FY21E. On a post-money basis UJVNSFB implies a market capitalisation of Rs63bn. There is no comparative valuation for UJVNSFB given the varying return metrics and therefore the significantly broad range of valuation multiples for AUBANK and EQUITAS. Based on a baseline ROA assumption of 2% and CoE of 13.5%, UJVNSFBs fair value is placed in the Rs35-40 range. We therefore believe UJVNSFB will have to deliver significantly better RoAs for the stock to generate upside. For a comparison of return metrics, see Exhibit 4 on pp. 2. Our 25%YoY profit growth in FY21E implies 1.75% RoA.Key risks: UJVNSFB has disclosed in the RHP some of the red flags raised by RBI regarding risk management as well as product offerings. Such operational risks if not redressed could attract regulatory sanctions on business. Disclaimer: This report has been prepared by IndiaNivesh Securities Limited (“INSL”) and published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for circulation or public distribution. INSL includes subsidiaries, group and associate companies, promoters, directors, employees and affiliates. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available to others, in any form, in whole or in part, for any purpose without prior written permission from INSL. The projections and the forecasts described in this report are based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and it can be expected that one or more of the estimates on which the projections are forecasts were based will not materialize or will vary significantly from actual results and such variations will likely increase over the period of time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently. None of the forecasts were prepared with a view towards compliance with published guidelines or generally accepted accounting principles.This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into account the particular investment objective, financial situation or needs of individual clients. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their own investment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particular circumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. INSL does not take any responsibility thereof. Any such recipient shall be responsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved in securities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investors may realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection.Except for the historical information contained herein, statements in this report, which contain words such as ‘will’, ‘would’, etc., and similar expressions or variations of such words may constitute ‘forward-looking statements’. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. Forward-looking statements are not predictions and may be subject to change without notice. INSL undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. INSL accepts no liabilities for any loss or damage of any kind arising out of use of this report.This report has been prepared by INSL based upon the information available in the public domain and other public sources believed to be reliable. Though utmost care has been taken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by INSL that such information is accurate or complete and/or is independently verified. The contents of this report represent the assumptions and projections of INSL and INSL does not guarantee the accuracy or reliability of any projection, assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis report. This report may not be followed by any specific event update/ follow-up.Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter; INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.)
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NBCC – Nivesh Velocity Portfolio
Investment Norms: INR 10 Lakhs (Model Corpus) Maximum Stocks Open: 10 Target Investment Horizon: 6 Months Occasional hedging by buying options or shorting index futures. Investment rationale on every idea is provided. 10% in a particular Stock and 30% (max) in a Sector. Cash holding based on market direction call. Cash to be deployed in case of sharp market fall. Cash holding to earn notional interest income of 4% p.a. STOCKS RATIONALE NBCCCMP 53 TGT 77 NBCC is a big beneficiary of Infrastructure and housing for all (affordable housing) thrust by government in concurrence with improving rural and semi-urban economy. Its standing order book has swollen above INR 80,000 crore at an healthy annual run rate. For FY19 so far it has received INR 6,000 crore, worth of orders. In FY18 it registered a top line of around INR 7100 crore, net profit of INR 372 crore & cash profit of around INR 550 crore. Book to bill ratio stands at 11.5x and order book to sales at 8.5x which gives revenue visibility for next 10 years at constant top line based on FY18. It is insulated largely from rising input costs as primary business is Project Management Consultancy (PMC) driven by asset light business model. PMC contributes around 90% to top line & almost 100% to bottom after covering costs of other business forays. It has recently forayed into Real Estate with an eye on affordable housing, housing re-development projects and building of new townships. Strong financials and steady cash flow is an added advantage. Cash per share in books as of FY18 stands at Rs. 13.75. Topline CAGR stands at 15% and PAT at 10% for last five years. We expect execution to pick up steam on existing order book, delivering earnings CAGR of over 20% in next two years; which translates into an EPS of Rs.3.88 for FY20e. The stock is currently trading at a PER of 13.66x based on EPS estimate for FY20e. Rock solid debt free balance sheet, proven execution capability, return ratios in high teens, makes it a compelling buy in light of steep stock price correction. Valuing the company at a PER of 20x based on FY20e, per share price comes at INR 77.60, leaving a scope of 45% potential upside from current levels. We recommend accumulating NBCC. About the Company: NBCC is into Project Management Consultancy (PMC), Engineering Procurement & Construction (EPC) and Real Estate (RE). PMC being is chief revenue contributor. Company's PMC business segment includes management and consultancy services for a range of Civil Construction Projects including Residential and Commercial Complexes, Re-development of Colonies, Hospitals, Educational Institutions, Infrastructure Works for Security Personnel, Border Fencing as well as Infrastructure Projects such as Roads, Water Supply Systems, Storm Water Drainage Systems, Water Storage Solutions and Solid Waste Management Schemes at different towns all over India. Majorly orders comes from various ministries of Central & State Governments. Some of the mega projects done by NBCC are World Trade Centre at New Delhi and International Exhibition-cumConvention Centre at Pragati Maidan. Disclaimer: This document is STRICTLY for authorised recipients only and is prepared for information purposes only. The information provided herein, we believe, is from reliable sources. IndiaNivesh is not liable for the accuracy of the source data as well as the results of the calculations based on the same. We do not claim that the data provided herein is accurate and complete in all respects. This is not an offer or solicitation of any offer to buy or sell securities. No action is intended to be taken by the recipients based on this document. The recipients may take their decisions based on their own judgement and independent advice that they may receive before making any investment or disinvestment decisions. The recipients are advised not to take any decision only on the basis of this document. No portion of this document should be printed, reprinted, redistributed, reproduced, duplicated or sold. Disclaimer: This document has been prepared by IndiaNivesh Securities Limited (“INSL”), for use by the recipient as information only and is not for circulation or public distribution. 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This document is solely for information purpose and should not to be construed as an offer to sell or the solicitation of an offer to buy any security. Recipients of this document should be aware that past performance is not necessarily a guide for future performance and price and value of investments can go up or down. The suitability or otherwise of any investments will depend upon the recipients particular circumstances. INSL does not take responsibility thereof. The research analysts of INSL have adhered to the code of conduct under Regulation 24 (2) of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014. This document is based on technical and derivative analysis center on studying charts of a stock’s price movement, outstanding positions and trading volume, as opposed to focusing on a company’s fundamentals and, as such, may not match with a report on a company’s fundamentals. Nothing in this document constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable or appropriate to recipients’ specific circumstances. INSL does not accept any responsibility or whatever nature for the information, assurances, statements and opinion given, made available or expressed herein or for any omission or for any liability arising from the use of this document. Opinions expressed are our current opinions as of the date appearing on this document only. The opinions are subject to change without any notice. INSL directors/employees and its clients may have holdings in the stocks mentioned in the document.This report is based / focused on fundamentals of the Company and forward-looking statements as such, may not match with a report on a company’s technical analysis reportEach of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report: Dharmesh KantFollowing table contains the disclosure of interest in order to adhere to utmost transparency in the matter: INSL, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. This information is subject to change, as per applicable law, without any prior notice. INSL reserves the right to make modifications and alternations to this statement, as may be required, from time to time.Research Analyst has not served as an officer, director or employee of Subject CompanyOne year Price history of the daily closing price of the securities covered in this note is available at www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose name of company in the list browse companies and select 1 year in icon YTD in the price chart))