HDFC - Q1FY13 results: Core performance largely in line - Kotak

- Net Interest Income (NII) grew 26% on back of 19.4% growth in loan book (23% including loans sell-down) despite marginal (10bps) decline in NIM to 4.0% during Q1FY13. Net profit growth came at 18.6% YoY (Rs.10.02 bn) on back of robust NII growth despite lower other operating income (Rs.2.89 bn; decline of 5% YoY).

- During Q1FY13, both total approvals and disbursements grew at 17% and 20%, respectively. Overall loan book grew at healthy pace (19.4% YoY; 23% including loans sell-down of Rs.49.8 bn during LTM) - retail loan book grew at 22.5% (29% including sell-down), while corporate segment witnessed moderate growth (13.8% YoY).

- Its asset quality remained healthy with gross NPA improving to 0.79% at the end of Q1FY13 from 0.83% at the end of Q1FY12. However, consistency lies in the downward secular trajectory, where its gross NPA has declined YoY for last 30 consecutive quarters.

- HDFC has been consistently delivering earnings growth (23% CAGR during FY06-11); however, FY12 earnings growth was moderate (16.6% YoY) on back of high base (strategic stake sale in IL&FS and Lafarge during H2FY11). We are modeling net income to grow 19.4% YoY during FY13.

- At CMP, stock is trading reasonable at 3.2x P/ABV, post stripping the value of subsidiaries and investments. We maintain ACCUMULATE rating on the stock with unchanged TP of Rs.720 based on SOTP (core business valued at Rs.485, 3.5x FY13 ABV and Rs.235 for subsidiaries).

Source : Equity Bulls

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