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UBS Investment Research
HDFC
I n-line results
Event: Q2 results slightly ahead of UBS expectation
HDFC reported net profit of Rs9.7bn (+20% y/y) exceeding UBS-e and in-line
with consensus. Core operating income grew 14% y/y while spreads remained
stable sequentially at 2.3%. Other key highlights were: 1) approvals grew 18% y/y
while disbursement grew 19% y/y; 2) loans (including sell-down) grew 20% y/y,
3% q/q while individual/ corporate mix was stable; 3) company used excess
provisions of Rs2.5bn to meet new standard asset provision requirement as
prescribed by National Housing Board.
Impact: Maintain estimates
NIMs trended up with lending rate hikes and stable funding costs as expected; we
expect them to remain stable at current levels. HDFC is likely to maintain 20%
loan growth through the year with reduced competitive intensity. Other income
(dividend and fee income) should largely track business growth, though capital
gains, which picked up during Q2, are expected to be weak in FY12 vs FY11.
Action: Stable business with rich valuations
HDFC provides healthy growth, low asset quality risks and high return with a
proven management. However, due to rich valuations we are Neutral and would
wait for a better entry point. At current prices, the stock trades at 4.4x FY12E core
book and 17x FY12E core earnings.
Valuation: Maintain Neutral
We derive our price target through sum-of-the-parts methodology. At our price
target, standalone business trades at 4.4x FY13E book and 18x FY13E 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
I n-line results
Event: Q2 results slightly ahead of UBS expectation
HDFC reported net profit of Rs9.7bn (+20% y/y) exceeding UBS-e and in-line
with consensus. Core operating income grew 14% y/y while spreads remained
stable sequentially at 2.3%. Other key highlights were: 1) approvals grew 18% y/y
while disbursement grew 19% y/y; 2) loans (including sell-down) grew 20% y/y,
3% q/q while individual/ corporate mix was stable; 3) company used excess
provisions of Rs2.5bn to meet new standard asset provision requirement as
prescribed by National Housing Board.
Impact: Maintain estimates
NIMs trended up with lending rate hikes and stable funding costs as expected; we
expect them to remain stable at current levels. HDFC is likely to maintain 20%
loan growth through the year with reduced competitive intensity. Other income
(dividend and fee income) should largely track business growth, though capital
gains, which picked up during Q2, are expected to be weak in FY12 vs FY11.
Action: Stable business with rich valuations
HDFC provides healthy growth, low asset quality risks and high return with a
proven management. However, due to rich valuations we are Neutral and would
wait for a better entry point. At current prices, the stock trades at 4.4x FY12E core
book and 17x FY12E core earnings.
Valuation: Maintain Neutral
We derive our price target through sum-of-the-parts methodology. At our price
target, standalone business trades at 4.4x FY13E book and 18x FY13E 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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