Buy HDFC; target of Rs 1360: Prabhudas Lilladher

Prabhudas Lilladher's report on HDFCHDFC reported a modest quarter as adjusted PAT growth remained flat YoY though higher dividend income (booked during Q2FY16 vs Q1FY15) pulled up reported net profit growth to 18% YoY. NII grew by 7% YoY (~7% below PLe) as interest income on investments declined 9% sequentially due to moderation in rate environment. Loan growth stood at 12% YoY (18% YoY incl. loans sold to HDFC Bank) while individual loan growth stood at 14% YoY (23% YoY incl. loans sold). Loan growth remains under pressure as HDFCB has been fully exercising its loan buyback option, however this is still seen ROE accretive to parent. Spreads improved 1bp QoQ to 2.32% mainly led by 4bp QoQ spread improvement in the corporate portfolio. We maintain ‘Accumulate’ with PT of Rs1,360 which corresponds to 3.7x FY17E ABV.GNPLs/NNPLs increase by 6%/7% QoQ; maintain ACCUMULATE with PT of Rs1,360: Asset quality deteriorated slightly as GNPL/NNPL increased by 6%/7% QoQ while coverage ratio declined marginally. However HDFC carries excess provisions of Rs3.3 bn which provides comfort. We maintain ‘Accumulate’ with PT of Rs1,360 which corresponds to 3.7x FY17E ABV., says Prabhudas Lilladher research report.For all recommendations, click hereDisclaimer: 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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