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Weekly Wrap
Investment Idea
December 19, 2014
PTC India Fin Services Ltd.
BUY
CMP `63
Management encouraged by Government’s policy
initiatives and thrust on renewable energy
Fast growing power demand and need to achieve energy
security has underpinned new government’s policy thrust on
developing the country’s renewable energy resources. While the
Ministry of New and Renewable Energy (MNRE) is aiming for a
capacity addition of 30 GW during the 12th Plan period (20122017) from various renewable energy sources, the government
has set a mammoth target of adding 100 GW over the coming
five years. The latter would imply investment of US$100bn and
therefore represents debt financing opportunity of US$70bn.
The associated investment requirement in the value chain would
represent additional funding scope. Government also wants to
expand the National Solar Mission and enhance the capacity
addition target of 22 GW by 2022.
PFS’s growth trajectory could surprise positively;
renewable segment to lead growth
After closing sanctions worth `12bn in H1 FY15, PFS has added
sanctions worth `20bn so far thereby taking the YTD tally to
~`32bn. Of the incremental sanctions added post Sept 30th,
60-70% is for renewable energy projects (largely solar power)
and the rest includes a couple of transmission projects. For the
full-year, management hopes to achieve sanctions closure of `4546bn which appears highly probable given the year-end rush
typically experienced by the company. PFS expects to disburse
on the recently sanctioned renewable projects by the end of the
fiscal given shorter gestation period of such projects. Further,
disbursements on the existing sanction bank should take the
annual figure to `35-40bn. We estimate loan assets to reach
`77bn by the end of FY15 and double in the subsequent two
years thereby crossing `150bn by end-FY17; FY14-17 loan CAGR
would be strong 46%. More importantly, the share of renewable
energy segment in the loan book is likely to increase to 45-50%
as compared to 36% currently.
Spreads to be sustained; Asset quality resilient
barring a couple of cases
Since the start of Q2 FY15, company has been able to reduce its
borrowing cost by substituting short term bank loans by much
cheaper CPs and bargaining lower credit spreads over the Base
Rate. PFS expects to see further reduction in borrowing spreads
and an imminent reduction cycle in Base Rate would lower the
cost of long term bank borrowings significantly over the coming
24 months. This should help company in sustaining loan spreads
comfortably in the range of 4-4.5% notwithstanding any increase
in competition.
Though relatively unseasoned, PFS’s asset quality has been
resilient despite policy impasse impeding progress of various
projects in the power sector. The Gross NPLs stand at marginal
`43mn, just 8 bps of loan assets, and restructured assets are at
sub-3% representing only a couple of stressed exposures.
Sector: Financials
Sector View: Positive
Sensex:
27,371
BSE code:
533344
52 Week h/l (`):
60/11
NSE code:
PFS
Market cap (`cr):
3,223
FV (`):
Share price chart
Share holding pattern
(%)
10
Mar14
Jun14
Sep14
Promoters
60.0
60.0
60.0
Institutions
11.2
8.1
21.1
Others
28.8
31.9
18.9
PFS
Sensex
500
400
300
200
100
0
Dec-13
Apr-14
Aug-14
Dec-14
Valuation will continue to re-rate
PFS’s healthy performance in H1 FY15, subsequent interactions
with the management and government’s policy thrust on power
sector particularly in the renewable space has strengthened our
conviction in the business. We continue to believe that company
can deliver sustainable RoA of 3.3-3.5% and RoE of 17-18%
while operating on a comfortable leverage. Thus, there stands
significant room for incremental re-rating over the medium term
as the current valuation is reasonable at 1.8x FY17E P/ABV. The
key risk to our view on the stock is a delayed policy resolution
by the government which may impact growth and asset quality
adversely.
Financial summary
Y/e 31 Mar (` m)
Total operating income
yoy growth (%)
Pre-prov Op profit
Exceptional Item
Net profit
yoy growth (%)
EPS (`)
FY14
FY15E
FY16E
FY17E
2,430
4,142
5,896
8,206
35.1
70.4
42.4
39.2
2,192
3,857
5,483
7,627
822
436
0
0
2,077
2,644
3,327
4,693
99.4
27.3
25.8
41.1
3.7
4.7
5.9
8.4
Adj.BVPS (`)
24.0
25.7
29.5
35.6
P/E (x)
17.0
13.4
10.6
7.5
P/adj.BV (x)
ROE (%)
2.6
2.5
2.1
1.8
16.1
18.2
19.6
23.2
ROA (%)
5.0
3.9
3.4
3.5
Dividend yield (%)
1.6
1.2
1.6
2.2
25.2
19.6
17.2
16.1
CAR (%)
Source: Company, India Infoline Research
India Infoline Weekly Wrap
Market Outlook
After falling for two consecutive weeks, the Indian equity market
has managed to stage a smart comeback. The worries and
concerns have not really vanished but sentiment got a boost late
in the week from the Fed which seems upbeat of the US economy.
The Fed statement modified its ‘considerable time’ term replacing
it with ‘can be patient’ about the timing of the first rate hike. Both
perhaps mean the same thing which is why US markets led the
rally across global bourses.
The selling was accentuated early in the week by cross-asset
volatility, dollar swings and the oil price movement. The Russian
ruble's plunge sparked the sell-off across equity markets. Even the
rupee came close to breach the 64 per dollar mark.
Despite recent correction, investors appear ready to bet even on
counters that are fairly valued given the long-term growth potential
of stable companies. Trend in global markets, movement of rupee
against the dollar, and crude oil price will dictate near-term trend.
FIIs/MFs activity
800
Technical View
Turmoil in the global equities set the volatility for nifty, seen sharp
reversal from the lows of 8000 back towards 8250 at the end
of the week, Index futures saw short build. Nifty index futures
saw unwinding of longs positions with FII’s long/short in index
future stood at 3.35x. Maximum OI build up is seen at 8500 calls
and 8000 puts, suggesting the broader range. PCR stood at 0.92
levels recovered from 0.83 during the week. Banking continued
its out performance.
F&O View
Turmoil in the global equities set the volatility for nifty, seen sharp
reversal from the lows of 8000 back towards 8250 at the end of
the week, Index futures saw short build. Nifty index futures saw
unwinding of longs positions with FII’s long/short in index future
stood at 3.35x. Maximum OI build up is seen at 8500 calls and
8000 puts, suggesting the broader range. PCR stood at 0.92 levels
recovered from 0.83 during the week. Banking continued its out
performance.
Advance/Decline
1,500
Net FIIs inflow
(Rs cr)
(No of stocks)
Advance
Decline
Net MFs Inflows
400
1,200
0
900
(400)
(800)
600
(1,200)
300
(1,600)
0
(2,000)
9-Dec 10-Dec 11-Dec 12-Dec 15-Dec 16-Dec 17-Dec
Global performance
Shanghai
(%)
5.8
2.9
Nasdaq
2.0
IT
12-Dec
15-Dec
Capital Goods
1.1
Banks
0.8
0.7
(0.2)
BSE-200
(1.3)
Auto
(1.7)
0.1
Nifty
0.0
Health Care
FMCG
(0.6)
Realty
2.0
0.4
Metals
Sensex
0.0
2.6
1.9
(%)
Oil & Gas
Small Cap
(2.0)
11-Dec
Power
1.4
Nikkei
Hangseng
10-Dec
Sectoral performance
Dow Jones
2
9-Dec
4.0
6.0
(8.0)
(3.7)
(5.0)
(5.8)
(6.0)
(4.0)
(2.0)
0.0
2.0
4.0
India Infoline Weekly Wrap
Technical Check
Nifty 50 & CNX 500 top 10 Losers
Nifty 50 & CNX 500 top 10 gainers
NSE Nifty
Company
HCL Tech
1,589
BHEL
NSE Nifty
CNX 500
CMP
(`)
259
%
Chg Company
CNX 500
CMP
(`)
%
Chg Company
CMP
(`)
%
Chg
Company
5.1 Jk Tyre & Ind.
153
18.3
DLF
132 (13.2) Amtek Auto
4.7 Gujarat Gas
645
16.1
ITC
369
(6.8) Ansal Prop.
755
(5.3) IIFL
13.4
HUL
ONGC
349
3.7 GDL
349
11.3
Asian Paints
Coal India
376
3.2 Jsw Energy
102
11.2
Dr Dreddy
3.1 Capital First
361
9.8
Sunpharma
808
(4.2) Jai Corp
63
9.5
SSLT
208
(3.5) RIIL
266
8.5
ACC
1,380
HDFC
1,115
Infy
1,999
4.2 Jaypee Infra
22
733
3,199
CMP
(`)
%
Chg
177
(12.6)
25
(11.7)
154
(11.4)
(5.3) Rolta India
92
(11.2)
(5.3) Pip. Def
41
(10.6)
68
(10.4)
435
(9.8)
56
(9.1)
ICICI Bank
356
2.8 SCI
Hindalco Ind
158
2.8 Finolex Cables
435
2.5 PFC
299
8.1
Cipla
619
(3.4) Praj Ind.
62
(8.9)
2.4 Century Ply.
156
8.0
Tata Motors
486
(2.8) Bajaj Hind.
19
(8.6)
Gail India Ltd
TCS
2,511
Technically strong
Technically weak
CMP
(`)
10 days
Moving
Average (`)
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
51
50
18.5
144.2
728
713
68.9
34.4
Hero Motocorp
63
62
406.8
12.8
Indian Hotels
ICICI Bank
356
346
31.0
108.3
Canara Bank
428
416
54.5
35.1
Company
Ashok Leyland
Yes Bank
Shipping Corp
Bulk deals
CMP
(`)
10 days
Moving
Average (`)
Total
Traded Qty
(lacs)
10 days
Average
Traded Qty
(lacs)
636
647
218.0
4.8
3,074
3,130
71.4
3.7
116
118
9.3
8.1
Mcleod Russel
225
230
46.1
2.9
Century Textiles
502
514
47.7
8.4
Company
CESC
Book closure and record date
Company
Date
Purpose
AHMEDFORGE
24 Dec 2014
Dividend - `.1.00
1.4
AMTEKAUTO
24 Dec 2014
Dividend - `.0.50
7.1
172.7
AMTEKINDIA
24 Dec 2014
Dividend - `.0.10
4.0
363.6
-
-
-
-
-
-
Date
Institution
Scrip name
B/S
Qty
(lacs)
Price
(`)
17-Dec
Lotus Gobal
Farmax India
S
24.7
18-Dec
Reliance Capital
INOX Leisure
S
18-Dec
Wells Fargo
Mastek
B
Nifty Future VWAP
Bank Nifty Future VWAP
Nifty Futs Close
8600
(3.5) Db Realty
Nifty Vwap
Bank Nifty Futs Close
Bank Nifty Vwap
18800
18700
8500
18600
8400
18500
18400
8300
18300
8200
18200
8100
18100
18000
8000
17900
7900
15-Dec
16-Dec
17-Dec
18-Dec
19-Dec
17800
15-Dec
16-Dec
17-Dec
18-Dec
19-Dec
3
India Infoline Weekly Wrap
Commodity Corner
Base metals
Precious metals
Base metals moved lower this week, as markets are realising
the fact that falling energy prices will lower the mining costs
and in the process will encourage addition to the supply side
equation. In addition, demand concerns persist considering the
slowing economic growth trajectory in China, Europe and Japan.
In the latest, China’s factory activity contracted in December for
the first time in seven months. In this regard, the preliminary
HSBC manufacturing PMI index for December fell to 49.5, when
compared with November’s final reading of 50. On fundamental
side, International Lead and Zinc Study Group stated that global
Lead markets witnessed a surplus of 15,000 tons during the first
ten months of 2014, while global Zinc markets witnessed a deficit
of 277,000 tons during the same period.
At the onset of the week, precious metals witnessed wild gyration
amid the rout in emerging market currencies. In this respect, Russian
ruble slumped inspite of the fact that the country’s central bank
announced a hike in interest rates by a whopping 6.5% in order
to stem the fall in the domestic currency. Russian ruble and equity
markets have been adversely influenced by sharp fall in energy prices
and looming threat of recession. At the current juncture, precious
metals are losing further ground as global equities were pleased by
the fact that US Federal Reserve modified its communiqué on interest
rate hikes by stating that it will be relatively patient in adjusting the
monetary policy. The central bank elaborated that its new approach
is consistent with its prior stance that it would be appropriate to keep
rates near zero for a considerable time. Although Fed did not allude
to the synchronized global economic slowdown, Janet Yellen agreed
that falling energy prices could lower inflationary expectations.
However, she expressed that deflationary effects would dissipate over
period of time and inflation target of 2% will be gradually attained.
Although energy and the ferrous pack has been a victim
of supply glut, the case in the non-ferrous metals is quite
different. It’s the demand scenario which is haunting the
markets. The fortunes of the base metals pack hinges entirely
on the macroeconomic developments in China, wherein the
growth trajectory at the current juncture seems fragile.
On outlook, Gold bugs will be deprived of any substantial
impetus as the complex has has to eventually pay the price of
a relatively strong dollar and looming probability of an interest
rate hike. With US economic landscape improving and proving
to be immune till now from the global slowdown, we believe
that it is simply matter of time before the Fed initiates a rate
hike.
Note: This market commentary is written at 12:00 PM IST
Weekly inventory update
LME prices
Base Metals (US$/ton)
High
Low
LTP*
Chg(%)
Tons
Abs Chg.
Chg (%)
2.6
Copper
6,520
6,268
6,315
(2.7)
Copper (LME)
170,900
4,400
Nickel
16,860
15,200
15,650
(6.1)
Nickel (LME)
406,722
1,428
0.4
2,215
2,108
2,126
(3.0)
Zinc (LME)
681,700
(9,125)
(1.3)
4,271,625
(20,825)
(0.5)
220,800
600
0.3
Tin (LME)
12,190
920
8.2
Zinc
Aluminium
1,957
1,892
1,911
(1.2)
Aluminium (LME)
Lead
2,000
1,836
1,865
(6.5)
Lead (LME)
High
Low
LTP*
Chg(%)
Shanghai Copper
92,829
2,849
3.2
1,229
1,183
1,199
(2.0)
Shanghai Zinc
90,869
(5,942)
(6.1)
17.2
15.5
16.0
(6.2)
Shanghai Aluminium
214,660
(4,903)
(2.2)
Precious Metals (US$/ounce)
Gold
Silver
* Last Traded Price
LME Copper
10500
COMEX Gold
US$/ ton
2050
Copper (LME)
US$/ ounce
Gold
1900
9500
1750
8500
1600
1450
7500
1300
6500
4
Dec-14
Jun-14
Sep-14
Mar-14
Dec-13
Jun-13
Sep-13
Mar-13
Dec-12
Jun-12
Sep-12
Mar-12
Dec-11
Jun-11
Sep-11
Mar-11
Sep-10
1000
Dec-10
Dec-14
Jun-14
Sep-14
Dec-13
Mar-14
Jun-13
Sep-13
Mar-13
Sep-12
Dec-12
Jun-12
Dec-11
Mar-12
Jun-11
Sep-11
Mar-11
Sep-10
Dec-10
5500
1150
7
0
6
(2)
5
110
100
30
(%)
Six core Ind.
(INR/EURO)
(INR/USD)
(INR/GBP)
(INR/JPY)
IIP and Six core Industries
IIP
12
8
4
0
(4)
Currency Movements
90
80
60
50
130
120
50
70
Jun-12
Nymex Crude
Dec-12
Dec-13
Dec-14
Sep-14
Jun-14
Mar-14
10yr Gsec yield
3mth CP rate
Sep-13
Jun-13
Mar-13
4
Sep-12
6
Mar-12
8
Sep-11
12
(%)
Dec-11
10
Jun-11
13
Mar-11
14
Dec-10
MFG Products
Sep-10
Nov-14
Aug-14
May-14
Feb-14
Monthly Inflation
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
12
(%)
May-12
Feb-12
Nov-11
Aug-11
14
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
2
May-11
Inflation
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
(8)
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
16
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
India Infoline Weekly Wrap
Chartbook
Interest Rate
5yr AAA bond yield
11
10
9
8
Crude (Brent/ Nymex)
Brent Crude
110
100
90
80
70
60
Dollar Index
95
90
Dollar Index
70
85
80
75
40
Source: Bloomberg
5
6
Source: Bloomberg
10,000
40,000
18x
30,000
13x
7x
0
Nasdaq
24x
Cur. Yr
Mexico Bolsa
50,000
PE (x)
S&P 500
29x
26.0
24.0
22.0
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
Dow Jones
70,000
Sensex
Sensex PE Band
PE Comparision
1-Yr Fwd
14-Dec
9-Dec
4-Dec
29-Nov
24-Nov
19-Nov
14-Nov
(Rs)
9-Nov
VIX
FTSE
1,520
4-Nov
20
Straits
25
30-Oct
35
25-Oct
1,600
Taiwan
Volatility Index
20-Oct
250
DAX
40
Shanghai
300
Dec-14
Sep-14
Jun-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
50
15-Oct
60
Dec-10
China
10-Oct
Dec-14
Sep-14
Jun-14
PMI
Hang Seng
20,000
Nov-14
60,000
Nov-13
Oct-12
US
Dec-13
Germany
Mar-14
Euro Zone
Oct-11
Jun-13
Sep-13
India
Sep-10
Sep-09
Mar-13
Dec-12
Sep-12
Jun-12
40
Aug-08
Aug-07
Jul-06
Jul-05
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
(%)
Jun-04
Jun-03
May-02
10
May-01
Apr-00
45
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
65
Dec-10
India Infoline Weekly Wrap
Chartbook...
US Initial Jobless Claims
550
500
Initial Jobless Claims ('000)
55
450
400
350
Sensex Earning Estimates
FY15
1,580
30
1,560
1,540
15
India Infoline Weekly Wrap
News Recap
The Cabinet approved the Constitution Amendment Bill on Goods
and Services Tax (GST), clearing the way for its introduction in
ongoing session of Parliament to bring about long-pending
indirect tax reforms. (BS)
The trade deficit in November widened to a 18-month high of
USD16.86bn. (BS)
Petrol and diesel prices were cut by ` 2 per litre each as international
oil prices slumped to five-year low. (BL)
Wholesale price inflation hit the zero level in November, the lowest
in about five-and-a-half years, on account of a decline in prices of
food, fuel and manufactured items. (ET)
The Lok Sabha passed the Companies Act (Amendment) Bill, 2014,
which seeks to make 14 amendments, including those pertaining
to related party transactions and punishment for illegal money
pooling activities. (ET)
disease. (ET)
Within two months of diesel prices being made market-linked,
Reliance Industries Ltd (RIL) has begun offering discounts to
customers at its fuel retail outlets. (BS)
Reliance MediaWorks' proposed transfer of entertainment business
to Prime Focus has been cleared by fair trade regulator CCI, paving
the way for one of the biggest deals in this sector in the country.
(BS)
A fortnight after JSW announced that it has put its proposed steelcum-power plant at Salboni on hold, West Bengal Chief Minister
Mamata Banerjee said the group has decided to surrender the 294
acres purchased directly from farmers for the project. (BS)
The steep fall in oil prices and subsequent currency devaluation
of Russian Rouble and Venezuelan Bolivar will impact Dr Reddy's
FY16 sales and operating profits by 4-5%. (BS)
The Petroleum Ministry has proposed reworking the allocation
policy of natural gas from non-NELP blocks to give first priority to
firms selling Compressed Natural Gas (CNG) and Piped Natural Gas
(PNG) for allocating the limited resource. (BS)
NTPC Ltd, the country's largest thermal power producer, has
evinced interest to pick up 50% stake in the 2400 Mw (3x800)
power project to be set up at Kamakhyanagar in Dhenkanal
district. (BS)
The government notified draft rules for e-auction of cancelled coal
blocks suggesting floor price for bidding and ceiling for power
sector bidders. (ET)
The Odisha government has issued orders to restart operations of
four captive iron ore mines of Tata Steel following an interim order
of the Odisha High Court (HC). (ET)
The Ministry of Petroleum and natural gas has submitted a status
report on RIL's arbitration cases to the Prime Minister's Office
stating that there has been USD5.6bn production loss from Panna,
Mukta and Tapti (PMT) fields. (BS)
Steel Ministry directed PSU iron ore miner NMDC to advance its
100 mtpa production target by four years to 2020-21 to ensure
the raw material for the domestic steel industry at reasonable
prices. (BL)
Punj Lloyd has received FIPB approval for manufacturing
equipment and associated assemblies for the defence sector. (ET)
Five months after investor activism on managerial remunerations
forced Tata Motors, to do a rethink on the salaries offered to its
senior management, the company is seeking shareholder approval
again to fix remunerations to its executive directors. (ET)
The labour unions of state-run Coal India Ltd have threatened to
go on a five-day strike beginning Jan 6 to protest government
plans to sell off a stake and end the company's monopoly in
mining and distribution, officials said. (BS)
The Delhi High Court has reserved its verdict on a dispute between
pharma firms Novartis and Cipla over manufacturing of the drug
Indacaterol, used for treatment of chronic obstructive pulmonary
Maruti Suzuki India, the country's largest car maker, plans to hike
prices of its models in the range of 2-4% from next month in order
to partially offset the impact of rising input costs. (ET)
Event Calendar
Period: 22nd Dec – 26th Dec
US
• Nov Durable Goods Orders (23 Dec)
India
• Nov Eight Infrastructure Industries (26 Dec)
•
Q3 GDP Annualized QoQ (23 Dec)
•
Nov New Home Sales MoM (23 Dec)
Europe
• Dec Consumer Confidence (22 Dec)
IIFL, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013
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