Dewan Housing Finance - 4QFY2016 Result Update - Angel Broking

For 4QFY2016, Dewan Housing Finance Ltd (DHFL) reported a 17% growth in PAT to Rs. 190cr, which is lower than our expectation. The miss was on account of lower-than expected loan growth; however, on other operating parameters the company's performance remained satisfactory.

Loan growth remained decent: DHFL reported a 17.3% growth in loans during the quarter. The AUM grew by 22% yoy to Rs. 69,524cr, which is on including securitized assets. Sanctions and disbursements remained strong, growing by 32% and 22%, respectively. Total sanctions in FY2016 stood at Rs. 37,606 cr up 32%, while disbursements went up by 22% for the same period.

Project loans growing faster than overall loans: Loans to individuals grew by 17% (72% of the AUM) during FY2016. DHFL aggressively expanded its non-individual loan book during FY2016, primarily comprising of loans to projects, which grew by 83% and accounted for ~9% of the AUM vs 6%(FY15) The Management intends to take this share to ~16-17% of AUM over the next few years. Though project loans are perceived to be risky, DHFL's low tickets size of ~Rs. 25cr and higher yield on the project loans should take care of any incremental slippages.

Asset quality continues to be stable: DHFL has been able to maintain a stable asset quality over the last few quarters with GNPAs at 0.93% at the end of 4QFY2016 vs 0.95% as at the end of 4QFY2015. Lower slippages have resulted in stable provisioning at Rs. 50cr for 4QFY2016 vs Rs. 48cr for 3QFY2015. On a yoy basis, provision was up 43%; however, looking at the 83% growth in project loans where the provisioning requirements are high, this does not seem to be a cause of concern. NPA from the individual loan segment stood at 0.74% while that from the non-individual segment stood at 1.2% (LAP, Project Loans and SME combined); we don't expect any deterioration in the asset quality in the near term.

Margins as well as return ratios likely to remain stable: Though yield has come down, the overall cost of funds has also come down accordingly and hence DHFL has been able to improve its NIM for FY2016 to 2.96% vs 2.85% (for FY2015). With rising share of project loans the company should be able to retain its NIM above 2.9% and hence deliver ROA of 1.2% and ROE of 16% by FY2018. DHFL also received a refund of Rs. 250cr from a developer after a change in the latter's construction plans who now expects to complete the construction in 2-3 years. The release of funds and completion of the building would be a positive move.

Outlook and valuation: We expect the company to post a healthy loan book CAGR of 21% over FY2015-18E, which is likely to translate in earnings CAGR of 22% over the same period. The stock currently trades at 0.9x FY2018E ABV. We maintain our BUY on the stock with a target price of Rs. 270.

Shares of DEWAN HOUSING FINANCE CORPORATION LTD. was last trading in BSE at Rs.196.55 as compared to the previous close of Rs. 200.95. The total number of shares traded during the day was 237186 in over 3972 trades.

The stock hit an intraday high of Rs. 204.2 and intraday low of 195.45. The net turnover during the day was Rs. 47311830.

Source : Equity Bulls

Keywords