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Key Takeaways
Loan growth to remain healthy
Dewan Housing Finance's (DEWH) management aims to grow its consolidated loan
book by 30-35% in FY12 subject to continued rate hikes by the central bank in its
attempt to rein in inflation, which could adversely affect its growth trajectory.
Real estate prices in the metros continue to hold but in tier-II and tier-III cities,
which are DHFLs core markets, prices have seen some softening.
The incremental average ticket size increased to INR1m against the overall average
ticket size for the portfolio of INR0.5m-0.6m.
Margins unlikely to contract significantly
On a standalone basis DEWH's margins have remained in a band of 2.9-3.1%. The
management expects margins to be ~2.8-2.9%.
DEWH recently raised its lending rates by 125bp, effecting a 75bp and a 50bp hike
in the month of July and August respectively.
The NIMs for Deutsche Postbank Home Finance Limited (DPHFL) were ~2.7% for
1QFY12, which the management expects to bring to DEWH's level by increasing the
proportion of high yielding project finance and developer finance portfolio in the
DPHFL book. Currently, 99% of the DPHFL portfolio comprises residential mortgages.
DEWH's incremental cost of borrowing is 10.25-10.5% and the blended portfolio
yield is 13-14%.
Asset quality likely to remain healthy
The management does not foresee significant strain on asset quality. As on 1QFY12
gross NPAs were less than 1% and provision cover was healthy at 70%.
Capital raising in the offing
After the recent acquisition of Deutsche Postbank Home Finance Ltd. (DPHFL), the
leverage for DEWH on a standalone basis is ~9x and on a consolidated basis, it is
~13x.
DEWH may consider raising capital in the near to medium term as it consolidates
DPHFL with itself.
Current CAR for the standalone entity is 19% with tier-I ratio of 13.8%. DEWH has
headroom to raise tier-II capital.
Valuation and view
We expect DEWH to report consolidated earnings CAGR of 22% over FY11-13 with
RoA and RoE of ~1.5% and ~23% respectively. The stock trades at 1.3x and 1.1x its
FY12E and FY13E BV respectively. Maintain Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Loan growth to remain healthy
Dewan Housing Finance's (DEWH) management aims to grow its consolidated loan
book by 30-35% in FY12 subject to continued rate hikes by the central bank in its
attempt to rein in inflation, which could adversely affect its growth trajectory.
Real estate prices in the metros continue to hold but in tier-II and tier-III cities,
which are DHFLs core markets, prices have seen some softening.
The incremental average ticket size increased to INR1m against the overall average
ticket size for the portfolio of INR0.5m-0.6m.
Margins unlikely to contract significantly
On a standalone basis DEWH's margins have remained in a band of 2.9-3.1%. The
management expects margins to be ~2.8-2.9%.
DEWH recently raised its lending rates by 125bp, effecting a 75bp and a 50bp hike
in the month of July and August respectively.
The NIMs for Deutsche Postbank Home Finance Limited (DPHFL) were ~2.7% for
1QFY12, which the management expects to bring to DEWH's level by increasing the
proportion of high yielding project finance and developer finance portfolio in the
DPHFL book. Currently, 99% of the DPHFL portfolio comprises residential mortgages.
DEWH's incremental cost of borrowing is 10.25-10.5% and the blended portfolio
yield is 13-14%.
Asset quality likely to remain healthy
The management does not foresee significant strain on asset quality. As on 1QFY12
gross NPAs were less than 1% and provision cover was healthy at 70%.
Capital raising in the offing
After the recent acquisition of Deutsche Postbank Home Finance Ltd. (DPHFL), the
leverage for DEWH on a standalone basis is ~9x and on a consolidated basis, it is
~13x.
DEWH may consider raising capital in the near to medium term as it consolidates
DPHFL with itself.
Current CAR for the standalone entity is 19% with tier-I ratio of 13.8%. DEWH has
headroom to raise tier-II capital.
Valuation and view
We expect DEWH to report consolidated earnings CAGR of 22% over FY11-13 with
RoA and RoE of ~1.5% and ~23% respectively. The stock trades at 1.3x and 1.1x its
FY12E and FY13E BV respectively. Maintain Buy.
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