Dewan Housing Finance - 1QFY2018 Result Update - Angel Broking

DHFL came out with yet another quarter of good results. AUM growth of 23% and PAT growth of 29.5% was in line with expectations. Stable credit cost and ability to hold on to strong NIM were the key highlights of the quarter.

Loan growth accelerated further and momentum is likely to remain strong; After a strong 20% growth in AUM in FY17, the growth rate has further accelerated with 22.7% growth during Q1FY18. We expect 23% AUM CAGR over next three years, backed by higher incremental demand from the Govt's push for affordable housing. DHFL is a major player, lending to the LIG/MIG segment and the environment remains conducive for it.

Individual home loans picked up during the quarter, while LAP & Project finance continued to aid to the growth momentum: The home loans segment which had seen slowdown in Q4FY17 witnessed some momentum and grew by 12.2% YoY & 5.1% QoQ. The LAP and project finance segment continued see strong off take and grew by 27.1% and 83.8% YoY.The loan mix remained more or less stable with Home Loans / LAP / Project Finance constituting 66%/17%/15% of the AUM.

Cost of funds witnessed further easing leading to stable NIM, despite competitive pricing; DHFL has been able to maintain a stable NIM at 3.05%, due to further easing of cost of funds, down 12 bps QoQ to 8.71%. This is for the fourth consecutive quarters that DHFL has reported NIM above 3%.The management remains fairly comfortable that the NIM will be maintained going ahead.

No Sign of stress on the book, despite strong growth; DHFL has maintained a stable asset quality despite aggressive growth in the LAP and Project finance. For the last six quarters the GNPAs has remained in the range of 0.94% to 0.98% and for Q1FY18 it stood at 0.97%. While some NBFCs have witnessed incrementally higher stress in the LAP portfolio, the company remains optimistic about the quality of its LAP book.

Outlook and valuation: DHFL received Rs. 1,969 cr, via selling its 50% stake in its life insurance business, thus boosting its CAR by ~400 bps. With 18.7% CAR we believe the HFC is well capitalized to grow its book by ~23% over next two years, leading to 30% growth in PAT. At the current levels the stock is valued at 1.5x FY2019E ABV. We maintain BUY on the stock with a target price of Rs. 550.

Shares of DEWAN HOUSING FINANCE CORPORATION LTD. was last trading in BSE at Rs.460 as compared to the previous close of Rs. 462.1. The total number of shares traded during the day was 105268 in over 2431 trades.

The stock hit an intraday high of Rs. 465.15 and intraday low of 456.6. The net turnover during the day was Rs. 48450879.

Source : Equity Bulls

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