*Housing Development Finance Corporation** - SHAREKHAN *Recommendation: Hold Price target: Rs865 Current market price: Rs804
*Price target revised to Rs865** * Result highlights - For Q1FY2014, Housing Development Finance Corporation (HDFC) reported a profit of Rs1,173 crore (up 17.1% year on year [YoY]), which is below our estimate. The lower than expected growth in the net interest income (NII; up 16.7% YoY) and absence of capital gain income contributed to the variance. The operating profit increased by 15.3% YoY. - The interest spread was stable at 2.29% (vs 2.30% in Q4FY2013 and 2.27% in Q1FY2013) while the net interest margin increased to 3.9% from 3.45% in Q1FY2014. During the quarter, the spread on non-individual loans declined by 12 basis points quarter on quarter (QoQ) to 2.82%. - Overall loan book expanded by 19.4% YoY (up 24% YoY, including the loans sold). However, the non-individual book expanded by 11% YoY. Consequently, the proportion of individual loans expanded to 67% of the book. - The asset quality was largely stable as the gross non-performing asset (NPA) was at 0.7% vs 0.77% in Q4FY2012. The outstanding provisions including the standard asset provisions on the balance sheet were significantly higher than the regulatory requirement. - The non-interest income increased by 12% YoY though there was no income from capital gains. The fee income declined by 12% YoY but dividend income increased by 36% YoY. *Valuation:* HDFC's Q1FY2014 results were slightly lower than our estimate. Therefore, we have revised our estimate to factor rising competition and pressure on spreads. We expect earnings to grow at a compounded annual growth rate (CAGR) of 18.2% leading to a return on equity (RoE) of ~18 % and return on asset (RoA) of 2.7%. We maintain Hold rating on the stock with a revised sum-of-the-parts (SOTP) based price target of Rs865. -- CA. Rajesh Desai -- You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/globalspeculators. For more options, visit https://groups.google.com/groups/opt_out.
