HDFC - Earnings Trajectory on Expected Line; Result Update Q3FY15 ::Edelweiss

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HDFC’s Q3FY15 earnings trajectory was on expected line with PAT growing 12% YoY/5% QoQ to INR14.3bn. As anticipated, individual loan book grew 16% post sell-downs (23% adjusted for sell-downs). Interest spreads inched up marginally QoQ to 2.35% (versus 2.29% in H1FY15), led by better spreads in non-individual segment. GNPLs were flat sequentially at 0.69%, though management expects some resolution in non-individual book in 3-6 months.  Fee income was muted (down 43% YoY/55% QoQ), which was offset by INR1.12bn profit from sale of investment (stake sale in life insurance business to Azim Premji Trust) and INR120mn income from sale of office property. With asset growth expected at 17-18% and spreads at 2.3%, we estimate PAT CAGR of 16% over FY15-17. The stock is trading at 4.8x FY17 core mortgage book.

Growth momentum maintained in individual loans

Loan book grew 14.4% YoY to INR2.2tn, led by 16% growth in individual loans. In preceding twelve months, INR86bn of loans were sold adjusted for which individual loans would have clocked impressive 23% YoY growth and overall loan book 19%. It has increased focus on self-employed segment now forming 18% of incremental disbursements compared to outstanding base of 10-12% of indiivdual loans. Reliance on loan against property for HDFC is relatively low forming <5 11="" 17-19="" accounts="" anticipate="" arrested="" at="" book.="" chunky="" corporate="" disbursements="" even="" few="" fy15-17.="" grew="" growth="" has="" in="" individual="" is="" loan="" loans="" lower="" momentum.="" momentum="" nbsp="" of="" over="" p="" pace="" repayment="" seen="" segment="" this="" though="" traction="" we="">

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