HDFC (HDFC IN, Mkt Cap USD24.2b, CMP INR886, Buy) - Motilal Oswal

HDFC reported 4QFY13 PAT at INR15.5b (estimate of INR15.3b). AUMs grew 20% YoY and 5.7% QoQ to INR1.87t. AUM mix was largely stable during the quarter (retail/corporate mix at 68.6/31.4%, same as last quarter). Of the overall AUMs, corporate loans grew 5.6% QoQ and 13.5% YoY, while individual loans grew 24% YoY and 5.8% QoQ.

Key highlights:

- For 4QFY13/FY13, disbursements grew 29%/16% YoY and sanctions grew 8%/15% YoY. For FY13, growth in individual sanctions and disbursements stood at 29% and 33% YoY. Reported overall spread is largely stable at 2.3%, with individual spreads at 1.96% (1.95% in 9M) and corporate spreads at 2.94% (2.79% in 9M).

- GNPAs percentage on 90-day overdue basis declined to 70bp from 75bp QoQ. Within segments, GNPAs percentage in individual segment was 58bp (62bp QoQ) and in corporate segment was unchanged at 91bp.

- Other highlights: (1) Outstanding ZCB on the balance sheet stood at INR50.4b, (2) during the quarter, it sold INR0.5b of corporate loans and off balance sheet corporate loans stood at INR2.5b, (3) in FY13, infused INR220m in general insurance, INR100m in HT Parekh Foundation and issued INR200m convertible preference shares to the education venture.

- Valuation and view: Business growth will be driven by continued momentum in individual home loan segment and traction in housing demand in Tier II/Tier III cities. We model a loan CAGR of ~20% during FY14E/15E. Despite steep increase in rates, HDFC maintained spreads through its active asset-liability management. We believe these valuations are reasonable, considering company's growth potential, sound business fundamentals and substantially improved subsidiaries' performance (life insurance business has turned profitable). We maintain Buy with a SOTP-based target price of INR970.

Source : Equity Bulls

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