Research Calls: Centurion Bank of Punjab

Enam Securities rates Centurion Bank of Punjab as "neutral", relative to the sector.

The report states that during Q4 FY06, the bank cleaned up its credit book substantially, by using the proceeds of sale of its own stock.

The bank booked about Rs 62.5 crore of capital gains, while selling four crore Centurion Bank of Punjab stocks. These proceeds were used to provide for NPAs, resulting in net NPAs falling to 1.1 per cent in Q4 from 2.6 per cent in Q3.

Operating performance remained strong with NII growing 10 per cent sequentially and other income (mostly fee-based), growing 54 per cent. NIM at 4.84 per cent was slightly higher than 4.81 per cent in Q3. (The results are not comparable on y-o-y basis due to the merger of Bank of Punjab).

While, credit grew 15 per cent sequentially, deposits grew 9 per cent q-o-q. Retail portfolio now contributes around 70 per cent, almost the same as in Q3, though the proportion is down significantly when compared to 78 per cent in FY05 (standalone Centurion Bank). Within the retail book, the proportion of two-wheeler loans has fallen to 27 per cent from almost 40 per cent in FY05.

Corporation Bank

ICICI Securities downgrades Corporation Bank to "sell". Keeping in view the continued pressure on margins mainly due to a decline in investment profitability, sedate non-interest income performance and persistence of poor retail asset quality, the report has revised its estimates downward.

Valuations at FY07E P/E of 8.5x and P/BV of 1.1x are at the higher end of PSU banks' valuations and expensive for FY07E RoE of 14 per cent. Pressure on margins is unlikely to abate.

The bank's high investment profitability is vulnerable to a decline as it moves to a shorter duration portfolio. Funding costs are likely to increase further as there is no perceptible improvement in CASA and the loan to deposit ratio has already gone beyond 70 per cent, thereby pressurising resources.

The report expects NIM to fall from 3.48 per cent in FY06 to 3.19 per cent in FY08. Non-interest income and cost performance are likely to be sedate. Trading gains face a comparatively tough FY06 base and could fall further.

The competition has led to an erosion of profitability in traditional fee streams such as cash management. Cost ratios are unlikely to improve further mainly as the network has to expand considerably to garner low-cost resources.

JK Lakshmi Cement

ASK Raymond James maintains a "buy" on JK Lakshmi Cement. The company declared excellent Q4 FY06 results with a 105 per cent rise in PAT to Rs 23.7 crore as against expectation of Rs 27.1 crore.

The sales revenue grew by 43 per cent y-o-y to Rs 180 crore mainly driven by 23 per cent y-o-y growth in realisations and 16 per cent growth in volumes to 0.84 million tonnes.

EBIDTA margins grew substantially by 1,420 bps to 27.8 per cent. The growth in margins was on the back of jump in realisations as well as better cost control "� cost of production decreased by three per cent to Rs 1548/tonne. The company was recently relisted following the demerger of its investment division.