Kbsl_brokerage Sector Result Update

Result Update

Indian Brokerage Sector 28th October 28, 2009

OVERALL OUTLOOK: •

India Infoline, Motilal Oswal & Geojit BNPPARIBAS, the three major brokerage under our coverage universe have come up with their Q2FY10 results

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All three have delivered results which are better than the street expectations

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The companies scored on top line front mainly on account of increased revenue realization from equity and commodity brokerage segments while segments such as Mutual Fund advisory and Wealth management also registered healthy increase.

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The companies witnessed significant growth in margins mainly on account of an increased customer base, increased participation from the retail investor segment and an overall positive breadth on the market front also added to the cause

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The recent credit policy aimed at tackling inflation will have an impact on the revenues of the companies because reduced participation on the retail front and with the markets heading back to positions which we would term as expensive considering the valuation parameters a wait and hold approach from investors could dampen revenues. However considering the fact that the companies are regularly innovating their product portfolio and with an ever increasing demand for professional money managers the industry sure has a bright future

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Moreover we believe that with SEBI giving clearance for the extension of timings of equity market, would lead to higher revenues by the brokerage houses and thus we retain our earlier BUY call on each of the three stocks

Broking Stocks Vs Nifty 330

Indexd Price

290 250 210 170 130 90

Nifty

Geojit

Date India Info

1-Oct

1-Sep

1-Aug

1-Jul

1-Jun

1-May

1-Apr

1-Mar

1-Feb

1-Jan

50

Motilal

Source: BSE

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Result Update

India Infoline Limited. BSE NSE Bloomberg CMP Sector View

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India Infoline Limited (IIFL) declared its second quarter result on October 24th, 2009. The results came above the street expectations. The net sales were up by around 12.74% over the Bloomberg estimates while net profit was up by 3.85%

532636 INDIAINFO IIFL IN 135.80 Financial Services Positive

Market Data as on 27.10.2009 LISTING MARKET CAP (Cr.) 52-WEEK HIGH 52-WEEK LOW BETA CURRENT PE (x) INDUSTRY PE (x)

RESULT HIGHLIGHTS: NSE/ BSE Rs. 4,275.07 Rs. 173.50 Rs. 34.50 1.74 30.33 NA

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PRICE PERFORMANCE (%) as on 27th October 2009 Time Period 1 MONTH 3 MONTH 1 YEAR

Stock -9.74 5.03% 236.72%

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Nifty 50 -3.7% 5.45% 91.01%

FINANCIALS Fig in Crores

Particulars Q2 2010 Net Sales 313.37 Other Operating Income 0.20 Total Income 313.57 Total Expenditure 187.90 EBIDTA 125.67 EBIDTA Margin (%) 40.08% Depreciation 13.15 EBIT 112.52 EBIT Margin (%) 35.88% Other Income 0.03 Operating Profit 112.55 Interest 15.56 Exceptional Items 0.00 Profit Before Tax 96.99 Tax Provision 32.69 Net Profit Before Minority 64.30 Minority Interest 6.28 Net Profit 58.02 NPM (%) 18.50% Diluted EPS 1.73

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Q2 2009 276.04 0.45 276.49 188.77 87.72 31.73% 8.97 78.75 28.48% 0.19 78.94 11.60 0.00 67.34 23.53 43.81 3.59 40.22 14.55% 1.11

Growth 13.52% -55.56% 13.41% -0.46% 43.26% 8 3 5 .1 bp s 46.60% 42.88% 7 4 0 .1 bp s 42.58% 34.14% 44.03% 38.93% 46.8% 74.9% 44.3% 3 9 5 .6 bp s 55.86%

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India Infoline’s consolidated net sales for Q2FY10 grew by around 13.52%, YoY to Rs.313.37 cr. This was mainly on account of a increase average daily volume both in equity and commodity segment The company’s consolidated net profit were at Rs 58.02 crore, up by approximately 44%, YoY but up by a decent 12.3% on a QoQ basis Key Segmental revenue Growth: o Equities brokerage segment grew by around 30.5% and 9.5% on YoY and QoQ basis respectively o Commodities brokerage segment grew by around 36.0% and 18.3% on YoY and QoQ basis respectively o Life Insurance distribution business fell by around 15.3% YoY, while on a QoQ basis it witnessed a growth of 60.7% o Financing and Investment business on a YoY basis registered a de-growth of 10.1%, while on a sequential basis it witnessed a growth of 48.7% o Wealth and Mutual Fund advisory business registered a whopping 271% YoY growth, while on a QoQ basis it witnessed a growth of 125.9% Its EBITDA margin stood at 40.08% up 835 bps compared to the same quarter a year ago Average daily turnover up 3% QoQ to Rs.3336 crs, a 27% rise over the previous year Retail customer has increased by 7.9%, QoQ to 7.30 lakhs, while IIFL market share on NSE stood at 3.64% Company’s loan portfolio as on September 30th, 2009 stood at Rs.911 crs, while asset under management (AUM) crossed Rs.3,500 crs [email protected]

Result Update

Geo BNP Paribas BSE NSE Bloomberg CMP Sector View

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532285 GEOJITBNPP GSEC IN 39.35 Financial (Broking) Services Neutral

Geojit BNP Paribas declared its September quarter result on October 12, 2009. The results came in line with the street expectations. The sales and net profit registered an increase of 63.8% & 150.2% y-o-y respectively.

RESULT HIGHLIGHTS: Market Data as on 27.10.2009 LISTING MARKET CAP (Cr.) 52-WEEK HIGH 52-WEEK LOW BETA CURRENT PE (x)

§ NSE/ BSE Rs. 934.50 Rs. 52.50 Rs. 16.50 1.17 17.09

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PRICE PERFORMANCE (%) as on 27th October 2009 Time Period 1 MONTH 3 MONTH 1 YEAR

Stock -10.87% -3.08% 87.83%

Nifty 50 -3.7% 5.45% 91.01%

FINANCIALS Fig in Crores

Particulars Net Sales Other Operating Income Total Income Total Expenditure EBIDTA EBIDTA Margin (%) Depreciation EBIT EBIT Margin (%) Other Income Operating Profit Interest Profit Before Tax Tax Provision Minority Interest Net Profit NPM (%) Diluted EPS

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Q1 2009 75.17 0.46 75.63 55.16 20.47 27.07% 3.47 17.00 22.48% 5.32 22.32 0.21 22.11 8.52 0.53 13.06 17.27% 0.58

Q1 2008 45.89 1.80 47.69 37.51 10.18 21.35% 2.49 7.69 16.12% 2.92 10.61 0.07 10.54 4.97 0.35 5.22 10.95% 0.25

Growth 63.80% -74.44% 58.59% 47.05% 101.08% 5 7 2 .0 bp s 39.36% 121.07% 6 3 5 .3 bp s 82.19% 110.37% 200.00% 109.77% 71.43% 51.43% 150.2% 6 3 2 .3 bp s 132.00%

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The net sales for the quarter ended September-09 grew by 63.80% to Rs. 45.89 cr, backed by better performing stock market and high liquidity thanks to govt. stimulus to help revive the economy from the global meltdown As the company has only one reportable segment i.e, broking & financial services separate segment reporting is not applicable The EBIDTA for the quarter ended September-09 increased by 101.08% to Rs. 20.47 cr while the EBIDTA margin improved by 572 basis points (bps) to 27.07% as compared to 21.35% reported a year ago The total expenditure cost increased by 47.05% y-o-y. This was on account of 72.62% increase in operating expenditure, 26.68% increase in employee cost & 45% increase in other administrative expenditure Company’s interest expense increased by whopping 200% y-o-y to a level of Rs. 0.21 cr while the other income increased by 82.19% y-o-y to Rs. 5.32 cr Company’s Net Profit for the quarter ended September-09 rose by 150.2% to Rs. 13.06 cr as compared to Rs. 5.22 cr reported a year ago while, the NPM improved by 632.3 bps y-o-y to 17.27% as against 10.95% reported a year ago The net profit of Rs. 13.06 cr for the Sept-09 quarter is after providing for the loss of Rs. 2.22 cr in respect of the co.’s joint ventures in Saudi Arabia & institutional broking in India The company’s diluted EPS grew 132% y-o-y from 0.25 to 0.58 due to the increase in net profit

The company has withdrawn its membership from the various commodity exchanges which will impact its revenues going forward. Also with the growing concern of the inflation now gaining attention the Govt. & RBI are likely to tighten the current prevalent liquidity which will likely impact the markets & in-turn the company. The company’s diversification & low debt will come in handy in times of distress.

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Result Update Motilal Oswal Financial Services Ltd. BSE NSE Bloomberg CMP Sector View

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532892 MOTILALOFS MOFS IN 158 Financial Services Positive

Motilal Oswal Financial Services Limited (MOFSL) declared its second quarter result on October 14th, 2009. The results came above the street expectations. The net sales were up by around 19.96% YoY, while net profit was up by 75.1% YoY

Market Data as on 27.10.2009 LISTING MARKET CAP (Cr.) 52-WEEK HIGH 52-WEEK LOW BETA CURRENT PE (x) INDUSTRY PE (x)

RESULT HIGHLIGHTS: NSE/ BSE Rs.2,366.80 crs Rs. 196.3 Rs. 43.6 1.214 20.00 NA

PRICE PERFORMANCE (%) as on 27th October 2009 Time Period 1 MONTH 3 MONTH 1 YEAR

Stock -12.1 7.56% 179.65%

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Nifty 50 -3.7% 5.45% 91.01%

FINANCIALS Fig in Crores

Particulars Net Sales Other Operating Income Total Income Total Expenditure EBIDTA EBIDTA Margin (%) Depreciation EBIT EBIT Margin (%) Other Income Operating Profit Interest Exceptional Items Profit Before Tax Tax Provision Net Profit Before Minority Minority Interest Net Profit NPM (%) Diluted EPS

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Q2 2010 158.54 4.79 163.33 95.10 68.23 41.77% 3.52 64.71 39.62% 7.90 72.61 3.24 0.25 69.62 20.94 48.68 1.22 47.46 29.06% 3.33

Q2 2009 132.16 6.02 138.18 83.26 54.92 39.75% 4.46 50.46 36.52% -0.06 50.40 7.27 0.00 43.13 14.45 28.68 1.57 27.11 19.62% 1.91

Growth 19.96% -20.43% 18.20% 14.22% 24.24% 2 0 2 .9 b p s -21.08% 28.24% 3 1 0 .2 b p s 44.07% -55.43% 61.42% 44.91% 69.7% -22.3% 75.1% 9 4 3 .8 b p s 74.35%

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MOFSL consolidated net sales for Q2FY10 grew by around 19.96%, YoY to Rs.158.54 cr. This was mainly on account of a increase revenue from equity broking & other related activates The company’s consolidated net profit were at Rs 47.46 crore, up by approximately 75.1% YoY, but up by a decent 15.0% on a QoQ basis Key Segmental revenue Growth: o Broking & related revenues grew by around 31.0% and 8.0% on YoY and QoQ basis respectively o Investment Banking fees was up by 58% to Rs.15.2 crs as compared to Rs.9.6 crs in the previous quarter o Fund based income was down 7% QoQ to Rs.16.3 crs, while on a YoY basis it is down by 22% o Asset Management fees was up by 38% to Rs.6.4 crs as compared to Rs.4.7 crs reported in the previous quarter, while on YoY basis it was up by 26% Its EBITDA margin stood at 41.77% up 203 bps compared to the same quarter a year ago, while the net profit margin (NPM) increased by 944 bps for the quarter ended September 2009 to 29.06% For the period ended September 2009, the customer base increased to 5.80 lakhs Total Asset Under Management (AUM)/advice for the group stands at Rs.1500 crs The company had a strong balance sheet size with net worth of Rs.876.8 crs, while the total debt as on 30th, June 2009 stands at Rs.160 crs

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Result Update

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