HDFC Ltd. - Stable margins to off-set higher provisioning cost - Emkay

- HDFC Q4FY12 NII at Rs16.8bn/ PAT at Rs13.3bn – ahead of estimates. Healthy loan growth, qoq rise in adjusted NIM and stable asset quality were key +ve

- Rise in NIM aided by a) 67bps qoq increase in yield on-adv and b) funding via liquid invst. Term loans (+63% qoq) were raised in fag end of qtr; cost pressure to emerge in Q1FY13.

- Asset quality remains comfortable; cumulative provisioning at 1.2% of loans on B/s. Addln provisioning to be routed via P&L and thereby factoring 50bps of credit cost for FY13-14E.

- Stable margins would off-set higher credit cost and thereby protect RoA at 2.5% levels. Current valuations leave minimal room for upside. Maintain HOLD with target price of Rs700.

Source : Equity Bulls

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