For Q3FY2009 Tourism Finance Corporation of India (TFCI) reported a net profit of Rs6 crore, indicating a growth of 73.7% year on year (y-o-y).
This is ahead of our estimate of Rs5.7 crore on the back of a robust growth in disbursements coupled with margin expansion during the quarter.
The net interest income (NII) for the quarter increased 85.3% y-o-y to Rs11.3 crore in Q3FY2009 from Rs6.1 crore in Q3FY2008.
This was mainly due to a 30.0% year-on-year (y-o-y) increase in the interest income on the back of a strong growth in disbursements coupled with an 11.9% y-o-y decline in the interest expenses as the company retired debt worth Rs35 crore during the year-till-date (YTD) period.
For the nine-month period ended 31 December 2008, the other income more than trebled to Rs3.2 crore primarily driven by a Rs2.7-crore income on account of a profit from the sale of asset acquired against a settlement claim in Q1FY2009.
In line, the operating profit almost doubled to Rs10 crore in Q3FY2009 vs Rs5.1 crore in Q3FY2008.
The company made an ad hoc provision of Rs61 lakh towards gross non-performing assets (NPAs). There were no provisioning charges during the corresponding quarter of the last year.
The asset quality remained stable sequentially with the gross NPAs remaining unchanged at Rs50 crore, the same as in Q2FY2009. Notably, at the net level the company maintained zero net NPA status.
Outlook and valuation
We are revising our earnings estimate upwards for FY2009 by 10.2% to factor in the higher than expected performance during the YTD period.
We are also raising our FY2010 earnings estimate by 14.1% to factor in the higher credit growth on account a strong growth in sanctions during the year.
Besides, the company is now adequately capitalised to fund its future growth and has strong asset quality with zero net NPAs.
At the current market price of Rs14, the stock trades at 3.9x its FY2010E adjusted earnings per share (EPS) of Rs3.5 and 0.4x its FY2010E adjusted book value of Rs38.7. We maintain our BUY recommendation on the stock with a price target of Rs30.