State Bank of India
Reco price: Rs 2,223
Target price: Rs 2,000
State Bank of India’s (SBI) Q4FY10 (fourth quarter of 2009-10) results were disappointing, with net profit declining by 31.9 per cent year-on-year (y-o-y) to Rs 1,870 crore, led by higher operating expenditure and non-performing asset (NPA) provisioning. However, net interest income grew 38.8 per cent y-o-y to Rs 6,720 crore, ahead of estimates, led by 16.5 per cent y-o-y growth in advances and 13-basis point expansion in net interest margin. Gross slippages amounted to Rs 2,500 crore. However, during the quarter, the bank showed intent of accelerated provisioning of Rs 2,200 crore at 0.35 per cent of advances. The stock trades at 2.3x FY11E (estimated) and 1.9x FY12E standalone adjusted book. Maintain reduce.
— Emkay Research
GAIL
Reco price: Rs 433
Target price: Rs 440
GAIL reported a 44 per cent y-o-y increase in profit after tax (PAT) at Rs 910 crore for Q4FY10. Earnings growth was driven predominantly by higher earnings from the petrochemical and LPG business. Transmissions earning growth was, however, subdued as the company provided for lower Hazira-Vijaipur-Jagdishpur/Dahej-Vijaipur pipeline tariffs during the quarter. Subsidy payout for the quarter came in at Rs 338 crore as against nil in Q4FY09. GAIL’s earnings per share (EPS) sensitivity to rising crude prices, and under-recoveries, is the lowest among the PSU oil & gas (ONGC, OIL, oil marketing companies) — a $1/bbl change in crude price changes GAIL’s EPS by three per cent viz-a-viz ONGC/OIL EPS change of around seven per cent. Maintain hold.
— Ambit Capital
