F4Q13 PAT at Rs15.5bn (+17% YoY) was 2% below
MSe owing to lower NII (partly owing to back-ended
AUM growth and higher fees). Underlying NII
(adjusted for ZCB costs) was up 18% YoY.
Individual AUM growth was strong at 24% YoY.
Spreads improved sequentially. Consolidated PAT
was up 17% YoY, 22% QoQ.
Individual AUM growth continues to be strong
(+24% YoY, +6% QoQ): Despite noise around
competition over the last year or so, individual loan
approvals and disbursements for HDFC were up 29%
and 33%, resp., in F2013, and HDFC is likely gaining
market share (based on industry data). We continue to
like the retail mortgage space, given growth potential,
profitability and pricing discipline owing to base rate
regime. Non-individual AUM growth was muted at 13%
YoY, 6% QoQ. Overall AUMs grew 20%.
Spreads expanded to 2.3% for F13 from 2.28% for
F9M13: With wholesale funding rates coming off sharply
in the current FY (as seen from NCD issuances), we
expect spreads to do well in F2014.
Underlying NII was up 18% YoY, fee income growth
picked up to 47% YoY. The miss in NII (likely owing to
back-ended AUM growth) was offset by higher fees on
non-individual loans. Cost control was good (+10% YoY),
and asset quality continues to be strong (0.7% GNPL
ratio, down from 0.74% in F4Q12).
Maintain OW, Raise TP to Rs1,010. The stock trades
at 3.6x F14e BV (adjusted for subs) and 17.5x F14e P/E,
15x F15e P/E. Valuations, in our view, are reasonable in
the context of strong earnings outlook – 22% EPS
CAGR in F13-15e; 20%+ ROE – coupled with a strong
balance sheet – 0.7% NPL ratio and 13.8% Tier I ratio.
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