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UBS Investment Research
HDFC
A strong quarter
Event: Better than expected spreads beats UBS expectation
HDFC reported Q4Fy11 profit of Rs11.4bn +23%y/y, 28% q/q well ahead of UBSe
(Rs9.4bn) and consensus (Rs10.1bn). The outperformance came from stable
spreads q/q at 233bp. Core operating income grew 17%y/y, 31% q/q on back of
strong NII growth. Key highlights: 1) Approvals in FY11 grew by 24%Y/Y;
disbursements have grown by 20% Y/Y, 2) Spreads have remained stable at 2.3%
with higher proportion of corporate and hike in retail lending rates 3) loan
(including sell down) grew 24%y/y, 4) Gross NPA of 77bp (down 8bp q/q)
Impact: Raise estimates by 3% on stable spread outlook
We are raising our earnings estimates by 3% on stable spread outlook. HDFC has
been actively passing on the increase in cost of funds (hiked retail rates by 75 bps
since December) while sustaining its growth trajectory helping maintain
NIMs/spread. Change in loan mix in current quarter has also helped improve
yields. Capital adequacy is at 14% with tier-1 of 12.2%
Action: Raise price target to 775
We raise our PT by 3% to 775 on account of increased valuation of standalone
business. We maintain our Neutral rating due to rich valuations. At current price
standalone business is trading at 4xFY12E book and 16.5xFY12E earnings. We
value the investment in subsidiaries at Rs 260 per share
Valuation: Maintain Neutral
We derive our price target through sum of the part methodology. At our price
target, standalone business trades at 5.5xFY12E book and 21x FY12E earnings.
Housing Development Finance Corporation
HDFC is India's largest housing finance company with a 3.2 million customer
base. It operates a network of 271 branches and covers 2,400 locations through
its outreach programmes. Its mortgage book was Rs905bn as of 30 September
2009.
Statement of Risk
A faster than expected increase in rates will hurt earnings of the housing
business. A sustained downturn in markets will hurt earnings of the insurance
and asset management businesses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
HDFC
A strong quarter
Event: Better than expected spreads beats UBS expectation
HDFC reported Q4Fy11 profit of Rs11.4bn +23%y/y, 28% q/q well ahead of UBSe
(Rs9.4bn) and consensus (Rs10.1bn). The outperformance came from stable
spreads q/q at 233bp. Core operating income grew 17%y/y, 31% q/q on back of
strong NII growth. Key highlights: 1) Approvals in FY11 grew by 24%Y/Y;
disbursements have grown by 20% Y/Y, 2) Spreads have remained stable at 2.3%
with higher proportion of corporate and hike in retail lending rates 3) loan
(including sell down) grew 24%y/y, 4) Gross NPA of 77bp (down 8bp q/q)
Impact: Raise estimates by 3% on stable spread outlook
We are raising our earnings estimates by 3% on stable spread outlook. HDFC has
been actively passing on the increase in cost of funds (hiked retail rates by 75 bps
since December) while sustaining its growth trajectory helping maintain
NIMs/spread. Change in loan mix in current quarter has also helped improve
yields. Capital adequacy is at 14% with tier-1 of 12.2%
Action: Raise price target to 775
We raise our PT by 3% to 775 on account of increased valuation of standalone
business. We maintain our Neutral rating due to rich valuations. At current price
standalone business is trading at 4xFY12E book and 16.5xFY12E earnings. We
value the investment in subsidiaries at Rs 260 per share
Valuation: Maintain Neutral
We derive our price target through sum of the part methodology. At our price
target, standalone business trades at 5.5xFY12E book and 21x FY12E earnings.
Housing Development Finance Corporation
HDFC is India's largest housing finance company with a 3.2 million customer
base. It operates a network of 271 branches and covers 2,400 locations through
its outreach programmes. Its mortgage book was Rs905bn as of 30 September
2009.
Statement of Risk
A faster than expected increase in rates will hurt earnings of the housing
business. A sustained downturn in markets will hurt earnings of the insurance
and asset management businesses.
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