HDFC - 3QFY2013 Result Review - Angel Broking

HDFC (CMP: Rs.815 / TP: - / Upside: -)

HDFC's standalone net earnings grew by 16.2% yoy to Rs.1,140cr for 3QFY2013, slightly below our estimates, on back of lower-than-estimated growth on the operating income front. Stability witnessed on the spreads as well as on the asset quality front, was the key positive takeaways from the results.

Loan book growth remains healthy: During 3QFY2013, HDFC's loan book grew by a healthy 21.7% yoy, with loans to the individual segment growing by 24.8% yoy. HDFC has been incrementally growing its individual loan book much faster than its corporate loan book over the last nine months in order to improve its margins and non-interest income such as processing fees. Including loans sold, around 85% of the loans over the last nine months have been disbursed to the individual segment. The asset quality continued to be strong with the gross NPA ratio at 0.75%, lower than the 0.82% reported in 3QFY2012 and 0.77% in 2QFY2013. As of 3QFY2013, HDFC continues to maintain a 100% PCR. HDFC's NII rose by a healthy 18.8% yoy to Rs.1,624cr. Its pace of deposit accretion has accelerated over the last year growing by 43.2% yoy compared to overall loan fund growth of 22.2% yoy, which is expected to sustain healthy NII growth going ahead. For 3QFY2013, the bank's profits on sale of investments were higher by 9.5% yoy at Rs.96cr. Other income was higher by 63.5% yoy at Rs.8cr.

Outlook and valuation: At the current market price, HDFC's core business (after adjusting Rs.259/share towards the value of its subsidiaries) is trading at 4.6x FY2014E ABV of Rs.124.1 (including subsidiaries, the stock is trading at 4.5x FY2014E ABV of Rs.177.6). However, considering the valuations, the stock appears to be fairly valued in our view. Hence, we recommend Neutral on the stock.

Source : Equity Bulls

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