Dewan Housing Finance - On Stable Footing; Result Update Q4FY15 ::Edelweiss

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Dewan Housing Finance (DHFL) reported in line PAT for Q4FY15 at INR1.6bn (up 15% YoY). Key highlight was the more than 10bps NIMs expansion to 2.9% and AUM growth momentum being sustained above 25% levels (grew 27% YoY to INR569bn). Cost/income ratio further moderated to 29.7% (32.2% in Q3FY15) even as management has initiated steps to rein in the same and continued improving trend will be a key monitorable. Contrary to anticipation of decline, GNPLs inched up marginally to 0.84% (up 7bps QoQ) — as the increase is largely technical in nature management expects to normalise the same in ensuing quarters. DHFL has a lucrative model (bolstered by strategic inorganic expansion) that caters to a gamut of potential customers, portending humungous growth opportunities. We expect it to sustain loan CAGR of 20% plus, which along with improving NIMs will lead to impressive 25% PAT CAGR and improve RoE to 17% in FY17.

Growth momentum sustained

Disbursements maintained momentum moving up 12% YoY to INR63bn. DHFL’s lucrative model, which meets requirements of an entire gamut of potential customers, helped sustain AUM growth of 27% YoY to INR569bn. We expect overall AUM CAGR of 22% over FY15-17 to INR845bn, on 20% growth in disbursements during the period.

Cost-to-income ratio continued improvement

The high cost structure, a key monitorable, continued to improve in Q4FY15 declining 4% QoQ (but up 39% YoY on much lower base), leading to moderation in cost-to-income to 29.7% from 32.2% in Q3FY15. Taking cue from unflinching focus on improving productivity, management expects cost/income ratio to trend down to 24% over next couple of years.

LINK
https://www.edelweiss.in/research/Dewan-Housing-Finance--On-Stable-Footing;-Result-Update-Q4FY15/28884.html