HDFC - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, HDFC's standalone net profit grew by 18.6% yoy to Rs.1,151cr. Sustained spreads as well as asset quality were the positives from the results. We maintain our Neutral view on the stock.

Loan growth remains healthy: For 2QFY2013, HDFC's loan book grew by a healthy 22.2% yoy, with loans to the individual segment growing by 23.8% yoy. HDFC has been incrementally growing its individual loan book much faster than its corporate book over the last six months in order to improve its margins and non-interest income such as processing fees. Including loans sold, around 80% loans over the last six months have been disbursed to the individual segment. The asset quality continued to be strong with the gross NPA ratio at 0.77%, lower than the 0.82% reported in 2QFY2012. HDFC continued to maintain a 100% provisioncoverage ratio (PCR) for 2QFY2013, similar to 1QFY2013. Its net interest income (NII) rose by a healthy 17.8% yoy to Rs.1,634cr. HDFC's pace of deposit accretion has accelerated over the last year growing by 33.0% yoy compared to overall loan fund growth of 6.2% yoy, which is expected to sustain healthy NII growth going ahead. For 2QFY2013, the bank's profits on sale of investments were higher by 8.3% yoy at Rs.94cr. Other income was higher by 48.8% yoy at Rs.8cr.

Outlook and valuation: At the current market price, HDFC's core business (after adjusting Rs.246/share towards the value of its subsidiaries) is trading at 4.1x FY2014E ABV of Rs.123.5 (including subsidiaries, the stock is trading at 4.2x FY2014E ABV of Rs.176.9). We expect HDFC to post a healthy PAT CAGR of 18.5% over FY2012–14E. However, considering that the stock is currently trading at 4.5x one-year forward P/ABV and at a 51.2% premium to the Sensex in P/E terms (compared to an average of 37.8% since FY2006), we consider the stock to be fully valued and, hence, recommend Neutral on the stock.

Source : Equity Bulls

Keywords