Buy Dewan Housing; target of Rs 243: Emkay

Emkay Global Financial Services is bullish on Dewan Housing Finance Corporation and has recommended buy rating on the stock with a target of Rs 243 in its August 22, 2012 research report.

“Dewan Housing domain expertise in the LMI segment, product offerings across various customer segments and increasing ticket size reiterates our positive stance on growth. Despite intense competition in the mortgage space and competitive interest rates by mortgage players, expect DEWH to witness 28% CAGR in loan portfolio over FY12-14E. Q1FY13 loan growth at 40% yoy was aided by 24% yoy growth in individual loan portfolio, 2.4x yoy rise in LAP /LRD portfolio and 1.6x yoy rise in developer loans.”

“Q1FY13 witnessed share of non-individual loans rising to 18.4% vs from 8.4% in Q1FY12. Of the 18% portfolio, 12% is towards LAP / LRD with adequate collateral and lower loan-to-value ratio (LTV at <40%), thereby lowering the risk of default. In recent interactions, management has hinted for increasing the share of non-individual loans to 25%. Any increase in the share of non-individual loans will aid margin improvement. While Q1FY13 witnessed sequential rise in GNPA to Rs1.9bn (+50% qoq), this more of seasonal in nature and we expect GNPA to remain around 0.7-0.8% levels over FY13- 14E. Credit cost requirement is expected to remain high due to increasing share of non-individual loans and regulatory requirement. We have thereby raised our credit cost assumptions to 25bps average over FY13-14E vs 11bps average in FY11-12.”

 “We have lowered our standalone estimates by 4% / 7% for FY13/FY14 each and are now factoring in 28% CAGR in loans / 30% CAGR in net interest income over FY12-14E. We have valued the standalone entity at 1.2x FY14ABV (steep 33% discount to LICHF) and assigned 1x multiple to FBHF BV. Upgrade to BUY with a target price of Rs243 post recent correction,” says Emkay Global Financial Services research report.

FIIs holding more than 30% in Indian cos

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