Angel Broking neutral on HDFC

Angel Broking has maintained neutral rating on Housing Development Finance Corporation (HDFC), in its July 11, 2012 research report.

“For 1QFY2013, HDFC’s standalone net profit grew by 18.6% yoy to Rs1,002cr, which was in-line with our as well as street’s estimates. Higher-than-estimated loan growth, sustained spreads as well as asset quality were the positives from the results. We maintain our Neutral view on the stock.”

“For 1QFY2013, HDFC’s loan book grew by healthy 19.4% yoy to `148,262cr. Approvals in 1QFY2013 stood at `22,838cr (up 17.0% yoy), while disbursements stood at `15,552cr (up 20.0% yoy). HDFC’s asset quality continued to remain stable during 1QFY2013, with gross NPA ratio falling by 4bp yoy to 0.79%. On a six-month overdue basis, gross NPA ratio stood at 0.49%. Gross NPAs grew by 15.5% yoy to `1,190cr. HDFC continued to maintain a 100% provision coverage ratio for 1QFY2013, similar to 4QFY2012. HDFC’s net interest income (NII) rose by healthy 26.0% yoy to `1,258cr. HDFC’s pace of deposit accretion has accelerated over the last year, growing by 31.0% yoy compared to overall loan fund growth of 16.4% yoy, which is expected to sustain healthy NII growth going ahead. For 1QFY2013, the bank’s other income decreased by 4.1% yoy to `296cr primarily due to lower income from surplus from MFs (down 52.4% yoy). Fee income increased by 7.7% yoy and profit on sale of investments increased by 24.5% yoy. Income from dividends also came in higher by 20.7% yoy.”

“At the CMP, HDFC’s core business (after adjusting `232/share towards the value of its subsidiaries) is trading at 3.6x FY2014E ABV of `126.9 (including subsidiaries, the stock is trading at 3.8x FY2014E ABV of `176.9). We expect HDFC to post a healthy PAT CAGR of 18.5% over FY2012–14E. However, considering that the stock is currently trading at 3.8x one-year forward P/ABV and at a 51.6% premium to the Sensex in P/E terms (compared to an average of 37.9% since FY2006), we consider the stock to be fully valued and, hence, recommend Neutral on the stock,” says Angel Broking research report.    

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