HDFC (HDFC IN) - Stable growth lead by non-retail loans - CSEC Research

Stable growth lead by non-retail loans

- HDFC's Asset Under Management grew by a healthy 16%YoY to INR 3.38t. Growth in Individual loan book was noted at 16%YoY whereas growth in the non-individual loan book was at 17% YoY. Individual loans comprise 73% of the total loans. The average ticket size for Individual loans remained at INR 2.56mn.

- Management highlighted that the growth in Individual loan disbursement was subdued on account of demonetization. However, by the end of FY17, the individual disbursement growth trajectory began normalizing. During FY17, individual loans sold to the extent of INR 160.27bn vs. INR 127.73bn in FY16. On the Individual loans assigned/securitized, the residual interest is 1.24% p.a and is being recognized over the life of the underlying loans.

- Borrowing of the company increased by 17.7% YoY to INR 2.8tn. HDFC has reduced its ratio of Term loans from 18% in FY16 to 13% in FY17 and increased borrowings from Debentures and securities to 56% in FY17 (51% in FY16).

- Loan spread stands increased by 4bps YoY at 2.33%. Spread on individual loan was noted at 1.99% (1.94% in FY16) and spread on non-individual loans was noted at 3.09% (3.1% in FY16). NIM stood flat at 4.1% for FY17. Net Interest Income grew by 14% YoY at INR 32.1bn in line with the advances growth.

Valuation: The stock is currently trading at P/BV of 5.1x FY19E consensus estimates, excluding valuation of its subsidiaries. Given the stable growth in the loan book coupled with healthy spreads & well-managed asset quality; we maintain a positive outlook on the stock. Reiterate OUTPERFORMER, with a target price of INR 1,700 (Prev. Target of INR 1,555) assigning a P/BV of 5.5x FY19E. Risks: Rise in competition, particularly from banks can impact volumes & spreads; slowdown in the mortgage market.

Shares of HOUSING DEVELOPMENT FINANCE CORP.LTD. was last trading in BSE at Rs.1546.7 as compared to the previous close of Rs. 1561.7. The total number of shares traded during the day was 28485 in over 697 trades.

The stock hit an intraday high of Rs. 1562.4 and intraday low of 1540.1. The net turnover during the day was Rs. 44087344.

Source : Equity Bulls

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