Akash Jain
HDFC is one of the quality names in the housing finance space. We are bullish on the prospects of the company for long term. At current market price, the company seems fairly valued.
However, this company should be looked as a long term story on Indian housing finance space. In the near term, we expect a moderate upside of 20 percent by FY19 end.
Despite increasing competition in the home loan market with rivals State Bank of India (SBI), ICICI Bank and Axis Bank, HDFC has managed to maintain its market share. HDFC has grabbed market share by being consistent in keeping interest rates among the lowest in the industry. It has also maintained a healthy asset quality over the past several quarters.
Earlier this month, owing to increasing cost of funds and upward interest rate cycle, HDFC hiked its mortgage rates for loans above Rs 30 lakh by up to 20 basis points while those below Rs 30 lakh, which include priority sector loans, have been increased by 5 basis points.
HDFC has surpassed street expectations by registering a whopping over 39 percent in standalone net profit in Q4FY18 to touch Rs 2,846.22 crore. Standalone revenue from operations came in at Rs 9,327.84 crore during the quarter, rising by 10.34 percent from Rs 8,453.41 crore a year ago in the same period. Also, the revenue surged by 7.65 percent, compared to Rs 8,665.13 crore of Q3FY18.
NII or net interest income met expectations to grow 4 percent to Rs 3,249 crore. Last year in the same period, NII stood at Rs 2,852 crore, including the one-time gain of stake sale in its life insurance subsidiary.
For FY18, the standalone PAT increased by 63.43 percent to Rs 12,163.69 crore in comparison of Rs 7,442.64 crore in the previous fiscal FY17. Revenue during FY18 stood at Rs 35,229.89 crore, up by 6.24 percent, as against Rs 33,159.60 crore in the previous fiscal.
Profit on the sale of investments was Rs 294.31 crore for the quarter following entire stake sale in subsidiaries HDFC Realty and HDFC Developers to Quikr India. Profit on sale of investments during the year-ago period was at Rs 48.62 crore. After adjusting for the exceptional items and one-time transactions (i.e. profit on sale of subsidiaries and consequent special additional provisions), the profit before tax would have been Rs 11,397 crore for the year ended March 31, 2018.
Total loan book stood at Rs. 359,442 crore, up by 21 percent over last year. Of these, total individual loan disbursements grew by 29 percent and the average size of individual loans stood at Rs. 26.4 lakh. The non-individual loan book grew at 17 percent.
The individual loans grew to 73 percent of the total loans, up from 72 percent a year ago. Of the individual loans, 38 percent of home loans approved in volume terms and 19 percent in value terms have been to customers from the Economically Weaker Section (EWS) and Low Income Group (LIG).
Gross non-performing assets (NPAs) as at March 31, 2018 stood at Rs 4,019 crore, which is 1.11 percent of its loan portfolio. The NPAs of the individual portfolio increased marginally to 0.64 percent from 0.61 percent last year while that of the non-individual portfolio worsened to 2.18 percent from 1.16 percent a year back.
Provisions and contingencies in March quarter shot up 21.6 percent year-on-year and 89.5 percent sequentially to Rs 180 crore due to additional provisions. It has made an additional provision of Rs 80 crore to shore up the provision & contingencies account and thereby recognise provisions towards specific loans against future risks.
Consolidated total income was at Rs 21,248.79 crore, growing by 17.78 percent from Rs 18,040.59 crore, the same period a year ago. On consolidated basis, PAT stood at Rs 3,961.17 crore in Q4FY18 which was up by 28.63 percent from Rs 3,079.33 crore in Q4FY17, but down by 40.71 percent from Rs 6,681.54 crore in Q3FY18.
On consolidated segment-wise revenue break up, loan business by 13.43 percent YoY to Rs 10,226 crore in Q4FY18, while life insurance business rose by 8.64 percent to Rs 9,794.81 crore, general insurance up by 4.52 percent to Rs 931.67 crore, and asset management business grew 16.94 percent to Rs 529.99 crore.
For entire FY18, consolidated PAT was at Rs 16,254.96 crore, up by 47.08 percent against Rs 11,051.52 crore in FY17, whereas total income stood at Rs 69,141.67 crore, increasing by 13.18 percent as against Rs 61,087.63 crore in FY17.
HDFC earned a profit of Rs 5,257 crore from the initial public offer of HDFC Standard Life Insurance Company Limited (HDFC Life) and had created an additional special provision of Rs 1,575 crore as a charge to the statement of profit and loss, both were exceptional items.
Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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