HDFC - Q1FY14 Result Review - Angel Broking

HDFC reported standalone earnings growth of 17% yoy for the quarter, which was lower than our expectations, primarily on account of nil profit on sale of investments reported by the company vs. our expectation of around Rs70cr. Healthy loan book growth and stability witnessed on the spreads as well as on the asset quality front, were the key highlights from the results. NII for the company grew at 17% yoy (marginally lower than healthy advance growth of 19% yoy).

As the company reported nil profit on sale on investments during the quarter, noninterest income came in at mere Rs8cr as compared to Rs117 in last quarter and Rs28cr in 1QFY2013. Operating income and pre-provisioning profit grew at around 15% yoy. Provisioning expenses for the company declined 25% yoy to Rs30cr. Overall, the company reported standalone earnings growth of 17% yoy. Given the challenging macro developments, we believe within the BFSI space, defensive names like HDFC may not underperform the rest of the sector in spite of its rich valuations.

At CMP, HDFC's core business (after adjusting Rs311/share towards the value of its subsidiaries) is trading at 3.4x FY2015E ABV. We recommend an Accumulate rating on the stock, with a target price of Rs. 904.

Source : Equity Bulls

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