TCS GROUP: Target Price Increased on Encouraging Guidance
TCS Group last week released exceptionally strong 2Q17 IFRS results, once again beating market expectations, and improving its full year earnings and loan portfolio growth guidance to stratospheric highs. We have incorporated the latest results into our valuation model and increase our target price to $17.0/GDR (from $15.2, based on USD/RUB at 63). The stock trades at a 2018E P/E of 7.4x and P/BV of 3.2x, which does seem quite expensive compared to other Russian banks, but this is a result of extremely high RoE and EPS growth. We highlight that TCS has a well-organised business model, healthy balance sheet, and sufficient capital, and thus is a direct beneficiary of the improving macro conditions and consumer sentiment in Russia. We reiterate a BUY rating on the stock.
TCS Group Holding is a retail banking services group based in the Russian Federation. Co. is principally engaged in providing retail banking services in the Russian Federation through its subsidiaries, primarily Tinkoff Credit Systems. Co., through this subsidiary, fully licensed by the Central Bank of Russia and a member of the Deposit Insurance System, specializes in credit cards. Co. provides online retail financial services through a branchless operating platform. Co. also offers remote access to its financial products and services through its online banking as well as through mobile banking and high-volume call centers.
Since its inception in 1991, ATON has built a reputation for combining in-depth local knowledge of the Russian market with the highest international standards in research, sales and trade execution. As a result, we have been able to attract many of the leading domestic and international institutional fund management groups as our clients. As one of the leading independent investment banks in Russia, we offer the full range of institutional brokerage service, including:
- Detailed fundamental analysis of economics, sectors and companies, with the widest coverage universe in Russia and the CIS;
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- Competitive prices and prompt execution of trades;
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