Bank of India
Reco price/date: Rs 364/January 10;
Current price: Rs 365.65
Bank of India’s (BoI) management expects NPL recovery or upgradation of Rs 700-750 crore in Q3FY13 as compared to Rs 510 crore in Q2FY13 and Rs 550 crore in Q1FY13. Gross slippage is also expected to trend downward. By the end-FY13, GNPL (in absolute terms) is expected to be below the end-September 2012 mark of Rs 890 crore. Provision coverage ratio is expected to be flat at 61 per cent level; it would improve by end-March. On the loan restructuring front, the bank’s management expects fresh restructuring of Rs 800-1,000 crore (including Suzlon loan account). There was no loan restructuring request from any of the SEBs in Q3FY13. Further, management expects credit book to expand at 16-17 per cent in FY13 as compared to 20 per cent in H1FY13. The bank’s internal target on credit book expansion is 25 per cent YoY. Key focus area for credit book expansion would be agriculture, retail and SME sectors. On the margin front, the bank’s management expects domestic and overseas margins to expand. Global NIM is expected to expand to 240-245 basis points as compared 235 basis points in H1FY13. Buy.
Elara Securities
BHEL
Reco price/date: Rs 237/January 9;
Current/Target price: Rs 231.8/ Rs 200
BHEL has stopped material supply to Indiabulls Power’s Phase I projects in Nashik and Amravati after suspension of payment by financiers. Work is held up in Phase II of the same project. This clearly highlights the risk to BHEL’s backlog (Rs 1,22,300 crore as on Q2FY13). BHEL had earlier seen order cancellations to the tune of Rs 5,900 crore in the December 2011 quarter. Even if the Indiabulls Power orders don’t get cancelled there is a risk they would become slow-moving. Given the shortage of coal & gas, we wonder why any entity (state, centre or private) would place incremental orders. Once BHEL gets the last reserved bulk orders in FY13E, every incremental order would be a hard-fought battle. Import duties can provide a sentiment positive, but we wonder if it will make any difference. BGR-Hitachi’s winning bids in the recent bulk tenders are not too far off Chinese pricing. Maintain Sell.
Citi Research