Hold HDFC; target of Rs 792: ICICIdirect.com

ICICIdirect.com has recommended hold rating on Housing Development Finance Corporation (HDFC) with a target of Rs 792, in its October 23, 2012 research report.

“HDFC’s Q2FY13 earnings of Rs 1151 crore, up 19% YoY was in-line with our estimates. Continuation of strong traction in loan book mainly from individual portfolio, flat spreads QoQ and steady asset quality were the key highlights of the results. The concerns that competition from PSU banks and other peers may curtail HDFC’s loan growth have not yet been reflected. With PSU banks getting strong response after rate cuts and reduction in processing fees, the impact on HDFC’s book is to be watch out for going forward. We maintain our estimates of 20% and 19% CAGR in loans and profits over FY12-14E. Maintain Hold.”

“Loan book inclusive of loans sold rose sharply by 27% YoY, while net of loans sold the book grew by 22% to Rs 155128 crore mainly driven by individual loans which grew 24% YoY. Non individual book also witnessed a healthy increase of 19% YoY. In H1FY13, ~80% of the incremental growth has come from individual portfolio. Strong growth in other income (up 49% QoQ) was mainly due to dividend income (Rs195 crore), trading gains (Rs 94 crore, up 3.6x QoQ) and surplus from CMS of Mutual funds which doubled QoQ to Rs 92 crore. Such rise in other income helped offset moderate traction in NII. Operating efficiency improved sequentially. Calculated NIM moderated slightly QoQ to 3.04% owing to 13 bps rise in cost of funds and 6 bps fall in yields. Asset quality remained steady QoQ with provisioning remaining adequate. HDFC has maintained its guidance for loan growth at 18-20% in FY13. The company expects other metros such as Delhi NCR, Chennai and Tier II cities to be key growth areas. Adequate provisioning provides comfort against any adverse accretion in NPA. Consistent profits and healthy RoE and RoA of 22% and 2.7%, respectively, over FY12-14E remain key strengths of the company.”

“We upgrade our SOTP based target price by 10% to Rs 792 per share as we rollover to FY14. We have valued standalone lending business at 3.1x FY14E core ABV, giving Rs 513 per share of HDFC and SOTP target to Rs792. We maintain our HOLD rating on the stock,” says ICICIdirect.com research reports. 

Bodies Corporate holding more than 50% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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.

To read the full report click on the attachment

Read More