Kotak Mahindra Bank rating – Neutral: Growth momentum was maintained in Q4FY22 Kotak maintained strong growth momentum – consolidated loans grew 20.7% y-o-y (+6.1% q-o-q) with the standalone bank at +21.3% y-o-y (7.2% q-o-q). Sequentially, CV/CE, home loans, personal loans, cards, and SME loans grew sharply, while corporate loans declined. Growth in higher-yielding portfolio and a reduction in LCR resulted in NIM surprising positively and expanding 16bp q-o-q to 4.78%. Management intends to grow the unsecured segments from a very low base. PPOP (standalone) grew 12.7% y-o-y (1.8% below estimates). Net income grew 64.5% y-o-y and the beat was entirely driven by write- back of COVID-19 provisions of Rs 4.5 bn. The key negative was a sequential decline in both average CA and SA growth, which we think points to active balance sheet management to effect a desired growth/NIM outcome. Repeating such strong loan growth/NIM outcome consistently will likely get tougher in FY23F. We maintain Neutral with a lower TP of Rs 1,935.Asset quality held up: Gross NPA declined 37bp q-o-q to 2.34% while net NPLs declined 15bp q-o-q to 0.64%. Restructured assets declined 12% q-o-q (0.4% of loans). SMA2 was at 7bp of loans. Slippages at Rs 7.4 bn were in line. General provisions (ex of NPL provisions) are 73bps of loans versus 91bps in Q3. The decline was owing to a partial writeback of COVID-19 provisions. Change in estimates; remain NeutralWe lower FY23F EPS by 6% and leave FY24F largely unchanged. We are factoring in a CAGR of 13% in EPS and 12.6% in book-value over FY22-25F. We lower our TP to Rs 1,935, valuing the stock at 3.6x P/B (Mar-23F). We have lowered our price multiple from 4x to 3.6x P/B. While the stock has time-corrected, it still remains expensive for the RoE it delivers. On a consolidated basis, the stock trades at 3.7x P/B (Mar-22) and 27.5x P/E (12m to Mar-23F) vs the last 10-year average of 3.9x P/B and 26x P/E, respectively. The implied valuation of standalone bank is 3x P/B on a 12m-forward basis.
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.