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1QFY2012 Result Review
HDFC
For 1QFY2012, HDFC’s standalone net profit grew by healthy 21.6% yoy (down 26.0% qoq).
Although the spreads for 1QFY2012 witnessed a marginal decline, the asset quality continued
to be stable.
HDFC’s loan book grew strongly by 22.2% yoy and 6.0% qoq to `124,168cr during
1QFY2012. Approvals grew by 22.0% yoy to `19,500cr, while disbursements grew by 20.0%
yoy to `13,000cr. On a qoq basis, approvals declined by 12.1%, while disbursements
witnessed a decline of 29.6% mainly because of seasonality and a high base. The bank’s NII
increased modestly by 11.3% yoy, as rising interest rates increased the cost of funds for the
company. The spread on loans over the cost of borrowings stood at 2.30% for 1QFY2012
compared to 2.34% for 1QFY2011. The asset quality continued to be stable during 1QFY2012,
with gross NPA ratio rising by 6bp sequentially to 0.83%. On a six-month overdue basis, the
gross NPA ratio stood at 0.55%.
At the CMP, HDFC’s core business (after adjusting `225/share towards value of the
subsidiaries) is trading at 4.53x FY2013E ABV of `107.5 (including subsidiaries, the stock is
trading at 4.46x FY2013E ABV of `159.7). We expect HDFC to post a healthy PAT CAGR of
17.8% over FY2011–13E. However, considering that the stock is currently trading at 5.2x
one-year forward P/ABV (compared to its median of 4.6x over the last five years) and at a
61.4% earnings premium to the Sensex (compared to an average of 43.1% over the last five
years), we consider the stock to be richly valued at its CMP and, hence, recommend Neutral on
the stock.
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