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HDFC (Housing Development
Finance Corporation)
Overweight
HDFC.BO, HDFC IN
4Q FY11: Margins resilient; maintain Overweight
• 4Q FY11: Better than expected: HDFC reported Rs11.4B of PAT (up
23% y/y), which was ~10% higher than our and consensus estimates. A
large part of the profit beat was due to higher investment income, but
margins also held up better than expected with NII 6% higher than
expected. Overall 4Q FY11 was a strong quarter, especially on margins
with in-line loan growth.
• Margins resilient: Reported spreads were stable at 2.3% q/q with NII
6% higher than expected. HDFC passed on interest costs with a ~50bp
rise in the lending rate in 4Q FY11. Margin resilience in this tight
liquidity environment in 4Q FY11 highlights HDFC’s ability to maintain
margins given its funding mix flexibility and minimal ALM gaps.
Withdrawal of teaser loans by SBI reduces competitive intensity and
improves the operating environment.
• Strong growth driven by individual loan book: Adjusted loan book
growth (sale of loans) was robust at ~24% y/y driven by strong
individual loan growth (adjusted) at 27% y/y. Sanctions/disbursements
y/y growth moderated in 4Q FY11, but this was largely due to a high
base impact, as disbursement growth was ~35% y/y. HDFC has seen
some moderation in Mumbai volumes, but growth in other states
remains robust. We believe higher rates could have an impact on real
estate volumes, but with repayments slowing, we see limited risk to our
20% loan growth assumption.
• Maintain Overweight: We adjust our earnings estimate by ~1% and
maintain our Mar-12 PT of Rs800. We expect margins to remain resilient
for HDFC compared to banks where we expect margin pressure over the
next 6-9 months. Its premium valuations are supported by high returns
combined with consistency and low risk, in our view. Key risks to our
Overweight recommendation are a slowdown in real estate supply which
could affect HDFC’s volumes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC (Housing Development
Finance Corporation)
Overweight
HDFC.BO, HDFC IN
4Q FY11: Margins resilient; maintain Overweight
• 4Q FY11: Better than expected: HDFC reported Rs11.4B of PAT (up
23% y/y), which was ~10% higher than our and consensus estimates. A
large part of the profit beat was due to higher investment income, but
margins also held up better than expected with NII 6% higher than
expected. Overall 4Q FY11 was a strong quarter, especially on margins
with in-line loan growth.
• Margins resilient: Reported spreads were stable at 2.3% q/q with NII
6% higher than expected. HDFC passed on interest costs with a ~50bp
rise in the lending rate in 4Q FY11. Margin resilience in this tight
liquidity environment in 4Q FY11 highlights HDFC’s ability to maintain
margins given its funding mix flexibility and minimal ALM gaps.
Withdrawal of teaser loans by SBI reduces competitive intensity and
improves the operating environment.
• Strong growth driven by individual loan book: Adjusted loan book
growth (sale of loans) was robust at ~24% y/y driven by strong
individual loan growth (adjusted) at 27% y/y. Sanctions/disbursements
y/y growth moderated in 4Q FY11, but this was largely due to a high
base impact, as disbursement growth was ~35% y/y. HDFC has seen
some moderation in Mumbai volumes, but growth in other states
remains robust. We believe higher rates could have an impact on real
estate volumes, but with repayments slowing, we see limited risk to our
20% loan growth assumption.
• Maintain Overweight: We adjust our earnings estimate by ~1% and
maintain our Mar-12 PT of Rs800. We expect margins to remain resilient
for HDFC compared to banks where we expect margin pressure over the
next 6-9 months. Its premium valuations are supported by high returns
combined with consistency and low risk, in our view. Key risks to our
Overweight recommendation are a slowdown in real estate supply which
could affect HDFC’s volumes.
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