RESULT UPDATE HDFC Ltd. by Ambit

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄

RESULT UPDATE
HDFC Ltd. — Gentle Trimming

• Healthy 39% YoY growth in NII; 22% growth in reported net profits
• Individual approvals remain robust; corporate loan growth slows down
• Lower interest outgo on term loans indicates mobilization towards fag end
• Bulk of the incremental resources parked in liquid funds during Q2FY11
• Marginal changes in asset mix forecasts for FY11E/FY12E
• Positive tidings priced in; maintain ‘HOLD’ with TP of Rs755

HDFC reported a performance broadly in line with our expectations, clocking a 22% increase in net profits at Rs8.08bn during Q2FY11 as against Rs6.64bn during the corresponding quarter last year.

On the balance sheet front, the company reported a robust growth in approvals as well as disbursements for individual loans, reflected in an 18% YoY growth in the loan book. However, YoY growth in the corporate loanbook has corrected sharply from the mid-20s to the high-teens.
Valuation and recommendation: At its CMP of Rs725, the stock quotes at 5.3x our FY12E standalone ABVPS estimates of Rs134.3. Given the steep run-up in the stock over the last 3 months (~5% outperformance) and especially over the last month (3% outperformance), we believe that the growth positives have been fairly priced in. We maintain our ‘HOLD’ recommendation on the stock with a revised target price of Rs755 based on our FY12E estimates.