Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Consistent and risk‐free growth: In the current uncertain environment, HDFC
offers consistent ~20% growth, with limited/no asset quality risks. High rates
and slowdown has impacted real estate volumes in large cities. However, HDFC
continues to deliver consistent sanction and disbursement growth, with
increasing volumes from Tier 2/3 cities. HDFC has delivered ~20% EPS growth
over the last decade and we see little risks to ~20% EPS growth as expected.
Regulatory initiatives intensify; limited P&L impact: NHB's tightening initiatives
over the last 12 months will not have a meaningful impact on profitability.
Prepayment penalty contributes just ~1% of HDFC’s profits and thus, impact is
limited. Excess provisions would be more than enough to offset new standard
provisioning norms (0.4%) and impact for incremental loan growth is <2% of
PBT. NHB’s guidelines on providing old and new customers with same rates are
extremely difficult to implement, given the difference in funding scenario at
different periods.
Addressing longer term policy/regulatory concerns: (1) We do not believe that
P&L is overstated due to ZCB interest amortisation through reserves as ZCBs
quantum equals subsidiary investments which are not consolidated (2) HDFC is
comfortable on Tier-1 capital even after adjusting investment in HDFC Bank as
capital deduction and not risk weight and also in case, regulatory Tier-1
requirements are increased.
Accumulate, PT of Rs725/share: Our Sep-12 PT of Rs725/share based on twostage
Gordon growth implies 4x Sep-12 book, factoring in subsidiary value of
Rs210/share (15% holding discount). Mortgage book valuations look expensive
on P/B basis but adjusted ROEs at ~25-26% v/s 18-20% for HDFCB/private banks
warrants a premium. Earnings do capture high ROEs and valuations on P/E basis
at 15x Sep-12 EPS, though not cheap, is reasonable for consistent 20% growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Consistent and risk‐free growth: In the current uncertain environment, HDFC
offers consistent ~20% growth, with limited/no asset quality risks. High rates
and slowdown has impacted real estate volumes in large cities. However, HDFC
continues to deliver consistent sanction and disbursement growth, with
increasing volumes from Tier 2/3 cities. HDFC has delivered ~20% EPS growth
over the last decade and we see little risks to ~20% EPS growth as expected.
Regulatory initiatives intensify; limited P&L impact: NHB's tightening initiatives
over the last 12 months will not have a meaningful impact on profitability.
Prepayment penalty contributes just ~1% of HDFC’s profits and thus, impact is
limited. Excess provisions would be more than enough to offset new standard
provisioning norms (0.4%) and impact for incremental loan growth is <2% of
PBT. NHB’s guidelines on providing old and new customers with same rates are
extremely difficult to implement, given the difference in funding scenario at
different periods.
Addressing longer term policy/regulatory concerns: (1) We do not believe that
P&L is overstated due to ZCB interest amortisation through reserves as ZCBs
quantum equals subsidiary investments which are not consolidated (2) HDFC is
comfortable on Tier-1 capital even after adjusting investment in HDFC Bank as
capital deduction and not risk weight and also in case, regulatory Tier-1
requirements are increased.
Accumulate, PT of Rs725/share: Our Sep-12 PT of Rs725/share based on twostage
Gordon growth implies 4x Sep-12 book, factoring in subsidiary value of
Rs210/share (15% holding discount). Mortgage book valuations look expensive
on P/B basis but adjusted ROEs at ~25-26% v/s 18-20% for HDFCB/private banks
warrants a premium. Earnings do capture high ROEs and valuations on P/E basis
at 15x Sep-12 EPS, though not cheap, is reasonable for consistent 20% growth.
No comments:
Post a Comment