HDFC result healthy; hold on to scrip: Angel Broking

Vaibhav Agrawal of Angel Broking believes that Housing Development Finance Corporation's (HDFC) quarterly results continued the same positive trend like the previous quarters. Their loan growth has been healthy but the net interest income may be a tad lower than expected, he told CNBC-TV18.

The mortgage lender reported a 17-percent increase in its net profit year-on-year to Rs 1,173 crore on the back on robust individual loan growth. Their net interest income (NII) increased to Rs 1,521 crore. He said, "Broadly, it looks like the spreads would have been maintained in this quarter as well." Agrawal advises to hold on to the stock as it will accumulate and be a market performer in this environment. Also read: HDFC Q1 net profit up 17% to Rs 1,173 cr, shrs fall 4% Below is the edited transcript of his interview to CNBC-TV18. Q: It has come in at Rs 1,173 crore. But there is no profit on sale of investments. Would you say numbers are in line? A: We were also taking about Rs 70-80 crore of income from investments. The management had later been indicating that they have not really cashed in on any investments in this quarter. So, it is relevant to look at the operating performance. Their loan growth at around 19.5-20 percent year-on-year is continuing their healthy trend on the growth front. The net interest income reflects that kind of growth – may be tad lower than what we expected. But, broadly, it looks like the spreads would have been maintained in this quarter too. So, on the operating level they have more of less continued the same trend as the earlier quarters. Q: We are waiting for the net interest income (NII) also to come in. But the expectation, by and large, on the street was between 18-24 percent growth. Given that range, and given what numbers you are seeing right now, how would you be approaching the stock? A: Within the kind of environment HDFC does continue to maintain a pretty steady performance. In the light of recent developments in the sector, a quality stock like HDFC at this point, even though valuations are obviously quite stretched, those who are having it should actually hold on to it. It would be accumulate to a market performer in this environment in spite of its valuations. Q: If the company does not report any profit on account of sale of investments, would that be a point of concern? Or it is just a choice and they could perhaps make up for it in the remaining few quarters too? Is there anything to read in the fact that they haven’t reported it this time? A: Not really. They do have a large amount of investment book at historical cost where they can continue to record gains over a period of time. So, that number tends to be a little volatile form quarter to quarter. So, we would not necessarily read too much into it. _PAGEBREAK_ Q: Any sort of concerns that you were penciling in as far as the asset quality is concerned? Do you expect that perhaps the kind of steady figures that they have been giving out would be maintained – the trend would be maintained this time? A: We would have to wait for that number. Q: Would you have penciled it in or not at all? A: As of now, for HDFC, there is no reason to pencil in any sharp asset quality concerns. So, we will have to wait if there is any new development over there.