India Infoline (IIFL) reported Q1FY10 financials overall in-line with our expectations.
Revenues grew by 37.2% q-o-q (versus 38.4% expected) and PAT grew 104.5% QoQ (versus 105.5% expected).
However, EBITDA Margins came in much better than expected at 37.4%, essentially due to lower operating costs (as a result of lower than expected broking revenues).
Despite 53.4% q-o-q revenue growth from the broking segment, we are somewhat disappointed with the performance (we expected 65% q-o-q growth).
The overall volume growth in the market for the quarter was 68% q-o-q and within that Cash volume growth was nearly 100% q-o-q.
IIFL’s gains from slightly increased in market share were more than offset by a decline in Yields from about 10 bps in Q4FY09 to 9.3 bps in Q1FY10. This decline is surprising was came about due to higher share of non-delivery cash volumes and F&O volumes.
The interest income increased 41.6% q-o-q, but overall asset book declined by 14.1% q-o-q. Essentially there is continued winding down of consumer financing book, but some pick-up in activity in margin financing. We expect an increase in asset book from Q2FY10 onwards.
Reporting a decline of just 30.4% in Insurance distribution (the decline from Q4 to Q1 is normally 40%+) is a sign that this segment is coming back on track after a forgettable Q3 and Q4FY09.
Similarly while overall IB revenues were just Rs9.0mn, the same is up from just Rs0.3mn in Q4FY09. We expect better performance from both Insurance distribution and IB over the next few quarters.
The outlook for most business segments of the company is good to excellent over the next couple of years.
Strong growth is expected in broking, financing, investment banking and asset management. Overall revenue and earning CAGR over FY09-11 is expected to be 27.8% and 32.5% respectively.
We maintain an ACCUMULATE rating on the counter.