Emkay Global's report on HDFCGrowth moderates• In 2QFY16, HDFCs earning was 5% lower than expectation at Rs16bn, driven by lower than expected NII growth (7% yoy). This was led by modest loan growth of 12% yoy and further shift of loan mix towards low-margin retail loans segment (69.6% of loans as compared to 67.6% in FY14). Loan sold-down (preceding 12 months) increased yoy to Rs130bn, adjusted for this AUM grew 14.6% yoy • Higher income from investments and dividend helped earnings, ex-this core PPP and core PBT grew at a modest pace of 5% yoy and 4% yoy. We cut FY16-17E earnings by 3%, led by lower NII growth assumptions • HDFC’s growth momentum has moderated given the limited opportunities in the corporate segment and slowing pace of retail loans. We expect growth to improve gradually and earnings CAGR to be 16% over FY16-18E. Valuations remain rich and scope for re-rating remains limited. Maintain Hold. Risks: Downside - Slowdown in the mortgage market, leading to lower-than estimated loan growth and higher NPAs. Upside - The potential listing of its insurance subsidiary, could unlock value, says Emkay Global research report.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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