HDFC - Results in line; outlook maintained - Ventura

Outlook

HDFC came out with numbers which were in line with expectations alleviating fears of competition intensifying in the housing finance market. While the corporate segment did show a slight dip, it was more than made up for by the individual loan portfolio growing at 22.5% yoy. Asset quality NIMs and the RoA continue to remain impressive. We continue to maintain a positive outlook on the stock and given the strong 20% growth in disbursals, we believe that the company can easily achieve a loan growth of 18-20% over the next couple of years. The stock is currently trading at 3.8x P/Adj BV and 3.3x P/Adj BV for FY13 and FY14 and recommend an accumulate on dips strategy.

Key Takeaways

- Housing Development Financial Corporation's (HDFC) revenues were higher by 29.3% yoy at Rs. 4914 crore aided by a 19.4% yoy growth in loan book to Rs 1,48,262.3 crore and stable NIM's (2.9%, +17 bps yoy). Spreads on the loans remained flat at 2.3 (-3 bps). Net profit for the quarter increased by 18.6% yoy to Rs 1001 crore. Net Interest Income grew by 26% yoy to Rs.1258.2 crore.

- Loan growth at 19% yoy was commendable given that it sold loans to HDFC Bank. Adjusted for this sell down the loan growth would have been far higher at 23%. Although the corporate loan book did slow down to 14% yoy, this was more than made up by the 23% growth in retail lending. The strong growth in sanctions (+17% yoy) and disbursals (+20%) gives us adequate comfort and we believe that HDFC will easily achieve its guidance of 18-20% loan growth over the next couple of years.

- Asset Quality continues to remain exemplary with GNPLs improving to 0.9%. However the provisioning expenses for the company have increased as it has changed its policy of charging the provisioning on standard assets to the P&L (instead of routing through the reserve and surplus account)

Source : Equity Bulls

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