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Housing Development Finance Corp. Ltd.
4Q: Loan growth strong,
margins hold-up; Buy
4QFY11 Earnings: 3% ahead; loan growth remains ~20%
HDFC’s 4QFY11 earnings at Rs11.4bn, up +23%, were 3% ahead of estimates
driven by ~20% loan growth (AUM) for retail and overall loan growth at ~19%.
Spreads also increased marginally (up 2bps yoy) to 2.33% (flat qoq). Momentum
in the underlying business continues to be strong with disbursements growth at
20% yoy in FY11. More importantly, retail disbursement growth also strong at
~25% yoy in 4Q (27% yoy in FY11). Core topline grew 16% yoy (2% ahead).
Asset quality comfortable with gross at 77bps (down 8bps qoq). Tier 1 at +12%.
Earnings growth to sustain at +20% on +19-20% loan growth
We have tweaked our net profit est. by ~3% for FY12/13 factoring in strong 4Q
(and FY11). We believe growth (retail vol.) is likely to sustain at +19-20%; this
coupled with stable spreads should allay any fears of earnings growth moderation.
Hence, estimate HDFC’s net profit growth at +21/20% over FY12/13. More
importantly, we believe the RoE is also likely to sustain at +23-24% through FY12-
13 after factoring in warrant conversion.
Maintain Buy and PO at Rs800
We maintain Buy and our PO at Rs800. We believe HDFC being a quality
“defensive growth” stock, valuations for the stock to be more “PE” led than BV led.
Hence, the stock trading at +21-22x FY11 earnings (adj. for subs) can continue to
trade at similar multiples one-year out given profit growth of +21/20% over
FY12/13. Moreover, although we maintain our subs value at Rs166/shr, we think
there may be some cushion to our SOTP, especially from life ins., which is
growing at a faster pace (22% APE new biz. vs. private sector contraction by 17%
in FY11) and is likely to break-even in FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Housing Development Finance Corp. Ltd.
4Q: Loan growth strong,
margins hold-up; Buy
4QFY11 Earnings: 3% ahead; loan growth remains ~20%
HDFC’s 4QFY11 earnings at Rs11.4bn, up +23%, were 3% ahead of estimates
driven by ~20% loan growth (AUM) for retail and overall loan growth at ~19%.
Spreads also increased marginally (up 2bps yoy) to 2.33% (flat qoq). Momentum
in the underlying business continues to be strong with disbursements growth at
20% yoy in FY11. More importantly, retail disbursement growth also strong at
~25% yoy in 4Q (27% yoy in FY11). Core topline grew 16% yoy (2% ahead).
Asset quality comfortable with gross at 77bps (down 8bps qoq). Tier 1 at +12%.
Earnings growth to sustain at +20% on +19-20% loan growth
We have tweaked our net profit est. by ~3% for FY12/13 factoring in strong 4Q
(and FY11). We believe growth (retail vol.) is likely to sustain at +19-20%; this
coupled with stable spreads should allay any fears of earnings growth moderation.
Hence, estimate HDFC’s net profit growth at +21/20% over FY12/13. More
importantly, we believe the RoE is also likely to sustain at +23-24% through FY12-
13 after factoring in warrant conversion.
Maintain Buy and PO at Rs800
We maintain Buy and our PO at Rs800. We believe HDFC being a quality
“defensive growth” stock, valuations for the stock to be more “PE” led than BV led.
Hence, the stock trading at +21-22x FY11 earnings (adj. for subs) can continue to
trade at similar multiples one-year out given profit growth of +21/20% over
FY12/13. Moreover, although we maintain our subs value at Rs166/shr, we think
there may be some cushion to our SOTP, especially from life ins., which is
growing at a faster pace (22% APE new biz. vs. private sector contraction by 17%
in FY11) and is likely to break-even in FY12.
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