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PNB Gilts: Debt market play - Views on News from Equitymaster
 
 
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  • Oct 29, 2001

    PNB Gilts: Debt market play

    With a healthy debt market environment, PNB Gilts has reported a fantastic performance in the first half of the current year. However, on a QoQ basis, the company's net profits have declined by 43% in 2QFY02.

    (Rs m) 1QFY02 2QFY02 Change 1HFY01 1HFY02 Change
    Interest Income 618 417 -32.6% 339 1,035 205.3%
    Other Income 3 4 38.0% 18 8 -57.5%
    Interest Expenditure 159 142 -10.5% 731 300 -58.9%
    Operating Profit (EBDIT) 460 275 -40.2% (392) 735 -
    Operating Profit Margin (%) 74.4% 65.9%   - 71.0%  
    Other Expenditure 11 18 53.5% 15 29 89.0%
    Profit before Tax 452 262 -42.1% -390 713 -
    Depreciation 1 2 91.0% 2 3 38.3%
    Tax 161 94 -41.9% 0 255 -
    Profit after Tax/(Loss) 290 166 -42.6% (392) 456 -
    Net profit margin (%) 46.8% 39.9%   - 44.1%  
    No. of Shares (eoy) 135 135   135 135  
    Diluted Earnings per share* 8.6 4.9   -5.8 6.8  
    P/E (at current price)   3.5     2.5  
    *(annualised)            

    Volatility in the debt markets has affected the company's turnover in the second quarter. As a result interest income have declined by 33%, QoQ. On a YoY basis the company's financials are not comparable due to a dramatic change in interest rates in the past one year (PNB Gilts' performance is fully dependent on interest rate change, which affects the G-Sec prices).

    During the first half, the company reported a turnover of Rs 502 bn as compared to Rs 333 bn as on March '01. It also gained market share by 300 basis points in the last six months to 8%. PNB Gilts trades aggressively in the debt market, which has enabled it to improve its turnover in the last six months. Also its initiatives to focus on retail segment of the market, which is yet to take-off, is likely to increase its market share further in the coming quarters.

    The company's tax provision increased substantially due to adjustment for deferred tax liability according to Accounting Standard-22. It has however not given separate figures for the same.

    At the current market price of Rs 17, PNB Gilts is trading at a P/E of 3x 1HFY02 annualised earnings and Price/Book value ratio of 0.7x. The company has declared an interim dividend of 10% and assuming that it will maintain the rate for full year, the dividend yield works out to 11.8%.

     

     

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