*1QFY14 Results Review - Antique * * *
*HDFC Limited - Steady performance continues* *Key Highlights * *HDFC Limited demonstrated one more quarter of steady performance with reported earnings at INR 11.7bn below our estimates of INR 12.05bn due slightly higher operating expenses. While 1Q tends to be a seasonally weak quarter in terms of excessive liquidity, however, overall core trends continued to be in line with expectations with buoyancy in retail loan growth, strong operating efficiency and excellent asset quality. * *Buoyancy in retail disbursement continues * Despite adverse macro environment and reasonable mortgage growth for the system (17% YoY), business growth for HDFC Limited continued to remain robust. Growth in individual loan book continued to remain strong at 24% YoY (including sell down at 31%YoY), while corporate loan book grew at 11% YoY. Loan mix has remained stable in favor of retail mortgages. Despite sell down of loans to HDFC Bank, overall loan growth posted was healthy at 19% YoY which is commendable in our view. Adjusting for that, loan growth would be higher at 24%.As of now, management has reinforced its view of targeting loan growth at 18-20% for FY14e. *Strong uptick in margins and spreads * NII for HDFC came in at 16% YoY given that the company builds up excess liquidity during 1Q and runs it down during the rest of the year. HDFC has invested INR400 bn in mutual funds during the quarter thereby negatively impacting margins. Reported margins were down 30bps QoQ to 3.9% while reported spreads declined 1bps QoQ to 2.29%. The company has once again increases its reli-ance on borrowings from money markets which now form 59% overall funding mix. Short term CPs (duration of 6 months) form 7% of overall funding and the company tends to borrow more at the long end of the yield curve (3-5 years) and hence is much better placed to manage tough liquidity environment. Management expects spreads to remain flat within its historical band of 2.15-2.35%. *Stable asset quality both on individual and non-individual loan portfolio* Asset quality continued to remain remarkable as always with GNPA ratios continued to improve YoY for 34th consecutive quarter in a row basis. The non-performing loans of the individual portfolio stood at 0.61% while that of the non-individual portfolio stood at 1.08%. Further, HDFC Limited continues to carry surplus provisions amounting to INR 4.75bn over the regulatory requirements. *Valuation & Outlook - RDD * We increasing our TP marginally from INR840/share to 873/share due to higher price attributed to HDFC Bank and maintain our Hold rating on the stock due to rich valuations. (4x FY15E P/BV and 20.5x FY15E P/E). -- 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.
