Accumulate HDFC; target of Rs 800: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Housing Development Finance Corporation (HDFC) and has recommended accumulate rating on the stock with a target of Rs 800 in its October 22, 2012 research report.

“Housing Development Finance Corporation’s loan growth at 24% YoY was robust, driven by ~27% YoY growth in individual AUMs. Margins were stable QoQ and the key highlight was the flexibility in funding mix with share of bank funding coming off from 26% to 13% with a proportional increase in deposits and bonds. Possible margin pressure due to competition and loan mix will be netted off by sharp drop in wholesale rates and high flexibility in funding.”

 “(1) Opex has inched up ~30% over the last three quarters and part of the jump is explained by new corporate office leased but not moved in and thus opex growth is expected to normalize in 2-3 quarters (2) Tax rate was lower largely due to lower tax rate on investment gains and dividends received (3) Dividend income jumped substantially in Q2FY13 as dividends from HDFC Bank was accounted for in Q2 in FY13 v/s Q1 in FY12."

“HDFC reported in‐line Q2FY13 PAT with higher-than-expected dividend income making up for higher-than-expected opex. Growth trends remain robust and flexibility in funding is aiding margins. Since our July‐12 upgrade, HDFC has moved up ~17% despite higher competitive intensity. Implied valuations on the mortgage business has inched up from 2.8x to ~3.2x FY14 book, providing only ~10% upside to our Sep‐13 PT of Rs825/share and hence, we downgrade HDFC to accumulate with a target of Rs 800,” says Prabhudas Lilladher research report.

Public holding more than 90% in Indian cos

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