HDFC Ltd 1QFY12: Business as usual for HDFC :: RBS

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


HDFC Ltd
1QFY12: Business as usual
HDFC Limited reported operating performance largely in line with estimates in
1QFY12. Business growth continues to remain healthy. The spreads remained
largely stable at 2.3%. A relatively less rate, competitive mortgage market and
HDFC's ability to maintain spreads provides comfort in the current environment.
1QFY12: Core earnings largely in line
! Net interest income (NII) grew 17% yoy (down 20% qoq) on the back of about 22% yoy loan
growth (+6% qoq). Note, the qoq decline in NII is a typical 1Q phenomenon.
! HDFC reported 1QFY12 spreads at 2.30% vs 2.34% in 1QFY11 (2.33% in FY11).
! Adjusting for interest cost on account of premiums payable on zero-coupon bonds (ZCBs)
which is being charged off against the securities premium account, the adjusted NII increased
15% yoy in 1QFY12 (-23% qoq).
! The company booked dividend income (largely from HDFC Bank) of Rs 1.3bn in 1QFY12
compared to Rs 1.2bn in 1QFY11.
! Profit on sale of investments were Rs 163mn in 1QFY12 (1.2% of total income) compared to
Nil in 1QFY11.
! Total other income constituted 16.2% of total income in 1QFY12 (13.6% in 1QFY11).
Business growth remains healthy and fairly balanced
! In 1QFY12, loan approvals increased 22% yoy (+24% yoy in FY11) and disbursements rose
20% (+20% yoy in FY11).
! The individual loan book grew 21.4% yoy (+5.8% qoq) and corporate loan book grew 24.6%
yoy (+6.4% qoq) as of June 2011.
! The individual loan book accounts for 63% of total loan book and the balance being corporate
loans as of June 2011.


Asset quality and provisions
! GNPLs (90 days overdue) at Rs 10.4bn were 0.83% of loans as of June 2011 (0.77% as of
March 2011). Further, GNPLs (180 days overdue) were 0.55% of loans as of June 2011
(0.46% as of March 2011).
! The provision for contingencies carried in books was Rs 11.7bn (0.94% of loan book) as of
June 2011 compared to Rs 8.4bn provision required as per NHB guidelines.
Key financials and valuation
! The standalone net profit increased 22% yoy to Rs 8.44bn in 1QFY12. Reported basic EPS
was Rs 5.75 in 1QFY12.
! At the current market price, HDFC’s core mortgage business trades at 4.5x FY13F book value
factoring in the warrant conversion (6.5x FY12F BV without the warrant conversion)
! At the current market price of Rs 714 and excluding our SOTP value of HDFC’s investments
in subsidiaries/associates and JVs of Rs 209, the standalone business trades at about 21x
FY12F EPS of Rs 24.