Buy Dewan Housing; target of Rs 365: Motilal Oswal

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Buy Dewan Housing; target of Rs 365: Motilal Oswal

Motilal Oswal is bullish on Dewan Housing and has recommended buy rating on the stock with a target of Rs 365 in its January 19, 2012 research report.

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Motilal Oswal is bullish on Dewan Housing and has recommended buy rating on the stock with a target of Rs 365 in its January 19, 2012 research report.

"Dewan Housing Finance's (DEWH) 3QFY12 PAT grew 21% YoY to INR750m (in line with our est. of INR768m). NII grew strongly by 44% YoY and 11% QoQ to INR1.2b (in line with est). Fee income performance remained impressive. However, higher operating expenses (up 95% YoY and 15% QoQ) offset the strong topline performance."

"Business growth remained strong with sanctions and disbursements growing 44% YoY to INR32b and 49% YoY to INR23b, respectively. Loans grew strongly by 50% YoY (10% QoQ) to INR185b. NII grew 44% YoY and 11% QoQ to INR1.2b (in line with est) on the back of strong loan growth coupled with ~4bp QoQ increase in reported NIM to 2.81%. Improvement in margins could be attributed to increase in high-yielding commercial loans coupled with better liability management. Fee income performance remained impressive with processing fees growing by 41% YoY and 21% QoQ driven by strong business growth. Meanwhile, third party distribution income grew 85% YoY and 22% QoQ, pushing up the overall fee income growth. Opex grew 95% YoY and 15% QoQ (22% higher than est) on account of higher expenses towards promotions and advertising for the second consecutive quarter. Moreover, DEWH made INR150m worth provisions including those towards standard assets (INR90m) and NPA and other provisions (INR60m)."

"At current juncture, DEWH offers a strong combination of value and growth. We expect consolidated loan CAGR of ~30% CAGR over FY11/13, while consolidated earnings are likely to grow at a CAGR of ~22% (post factoring in the impact of goodwill amortization). The stock trades at 1.1x FY12E and 0.9x FY13E consolidated BV. Maintain Buy," says Motilal Oswal research report.     

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To read the full report click on the attachment