HDFC Ltd - Q4FY13 Result Update - Kotak

- NII grew at healthy pace (13.0% YoY; high base last year) on back of strong growth in individual loan book (31% post loan sell-down during LTM) along with marginal improvement in spread. Net profit growth was also in-line (17.3% YoY) with our expectations despite absence of any chunky dividend income received during H1FY13. Spread improved marginally both QoQ and YoY, partly on back of warrants conversion done only few months back - interest expense declined QoQ during previous two quarters.

- Asset quality remained healthy - gross NPA improved to 0.70% (FY13) from 0.74% (FY12). Moreover, consistency lies in the downward secular trajectory, where its gross NPA has declined YoY for last 33 consecutive quarters. It is carrying an excess provision of Rs.2.86 bn above the regulatory requirement of Rs.15.06 bn. Despite several positive attributes, we believe stock is trading rich at 3.75x FY14E ABV, post stripping the value of subsidiaries and investments. Hence, we recommend REDUCE rating on the stock with revised TP of Rs.840 (Rs.800 earlier) based on SOTP method where core business is valued at Rs.605 (3.5x FY14 ABV) and Rs.235 has been assigned for subsidiaries.

Source : Equity Bulls

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