ICICIDirect's research report on HDFCPAT for Q3FY16 increased 6.7% YoY to | 1520 crore largely in line with our estimate of | 1537 crore NII grew 9% YoY to | 2103 crore, higher-than-expected mainly led by higher-than-expected growth at 12.8% YoY. Reported NIM was at 3.85% (down 10 bps QoQ). Spreads remained stable at 2.31% Net loans grew 12.8% YoY to | 248097 crore led by individual loans growing 14% YoY to | 173738 crore and forming 70% of the loan book while non individual loan grew 9% YoY Asset quality was maintained steady QoQ with GNPA flat at 0.72%, (GNPA - | 1794 crore). Provisioning surged QoQ to | 68 crore from | 52 crore as the management is building provisions HDFC has commanded premium valuations over the years due to its consistent track record in earnings and business growth. Return ratios have remained healthy across economic cycles with RoE >20% and RoA >2.5%. However, we expect its credit growth to moderate, going ahead. Hence, we expect PAT CAGR of 12.7% in FY15-17E vs. 15% expected earlier. Accordingly, we lower our target multiple for standalone entity to 3.3x FY17E ABV from 3.5x FY17E ABV. We maintain our BUY rating on the stock but reduce SOTP based target price to | 1330 from | 1410 earlier.
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