7/27/2019 Trade Ideas - IDFC August 2012
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August 1, 2012 Infrastructure Development Finance Corporation
(NSE: IDFC)
Trading bands
We expect IDFC to trade in the range of approximately INR 125
and INR 137 per share through August 2012, based
on the assumptions that the company would be able to grow its
loan book at an annual rate of 25-30%, interest
spreads will remain stable and there will be no material
deterioration in asset quality. As such, we recommendtraders to add
to positions at around INR 125-126 and reduce positions at around
136-137.
However, if markets were to turn volatile, we expect the
downside to be restricted to INR 110 (95% confidence)
and upside likely restricted to around INR 150. If such
opportunities were present themselves, we recommend
long positions at around INR 110 and advise exit from all / most
positions at around INR 150. Better still, we'll
consider long Put positions in the counter above the INR 150
level.
What to watch-out for
The company is scheduled to report results for the June quarter
on August 14, 2012 and we expect net profit of
~INR 3,800 million, loan book growth of about 30%, and net NPA
of no more than 0.25%. Any material deviation
from these expectations would prompt us to revisit our valuation
range indicated above.
In addition, we would watch-out for Government of India's policy
measures on infrastructure. Media reports
indicate that certain growth-inducing / confidence-boosting
measures are imminent; if that were to happen, we
will likely revisit our indicated value range, and especially so
for IDFC because the company's balance sheet is
considerably underleveraged and can grow at a rapid pace if the
policy environment is conducive.
171.0173.5
151.0152.5
137.1138.6
124.6 125.8
108.6 110.0
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Closing Price Short Sell Reduce Add Buy
