Buy Dewan Housing; target of Rs 289: Motilal Oswal

Motilal Oswal's research report on Dewan HousingDewan Housing Finance’s (DEWH) PAT grew 16.9% YoY to INR1.9b in 4QFY16. While the net income was in line with our estimate, though higher expenses (led by advertisement and CSR) led to a 6% PAT miss. Healthy AUM growth of 22% YoY and 5.3% QoQ to INR695b, margin expansion of 7bp YoY to 2.96% and stable asset quality were the key highlights of DEWH’s performance in the quarter.Business momentum remained strong for DEWH in 4QFY16, with sanctions/disbursements up 36%/22% YoY to INR128b/INR78.2b. Increased repayments of 7.2% as against a run-rate of 4.5% were due to higher prepayments and shift in loan mix towards non-housing portfolio, which stood at 28% of AUM, as compared to 23% in 4QFY15. DEWH continues to perform well on the growth and asset quality fronts. The company’s margins have improved, and a rating upgrade, coupled with reduction in base/wholesale rates, is likely to drive further margin expansion. Moreover, the management’s commitment to lower costs could provide delta to earnings. The stock trades at 1x FY17E P/B and 6.7x P/E, which is at a steep discount in comparison to other HFCs, though DEWH’s expected margin improvement and cost reduction could narrow this gap. Maintain Buy with a TP of INR289 (1.5x FY17E ABV). For all recommendations, click here 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.

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