Angel Broking has maintained a neutral rating on Housing Development Finance Corporation (HDFC) in its May 13, 2014 research report.
"HDFC standalone earnings performance for 4QFY2014 came on expected lines. However earnings adjusted for dividends and sale of investments grew at a slower pace of 9.9percent yoy. Advances growth slowed down to 15.9percent yoy ( as compared to ~20percent and above for last few quarters) aided by healthy individual advances growth at 19.7percent yoy (26percent yoy after adding back loans sold in last 12 months). Asset quality witnessed stability with Gross NPA at 0.69percent. Overall company reported standalone earnings growth of 10.8percent yoy at Rs1,723cr."
"For 4QFY2014, HDFC's loan book grew by a moderate 15.9percent yoy, with loans to the individual segment growing by 26percent yoy after adding back sold loans (growth of 19.7percent yoy excluding sold back loans). HDFC has been incrementally growing its individual loan book, much faster than its corporate loan book, over the past few quarters. During the quarter, incremental growth in the loan book (including loans sold) came majorly through growth in individual loans, which now constitute almost 68percent of the total loan book. The spreads increased to 2.29percent for FY2014 as compared to 2.25percent for 9MFY2014, while the reported NIM came in at 4.1percent for FY2014 as compared to 4.0percent for 9MFY2014. During 4QFY2014, the asset quality continued to remain strong for the company, as its gross NPA ratio came in lower at 0.69percent, as compared to 0.77percent in 3QFY2014 and 0.79percent in 2QFY2014. The company continues to maintain a 100percent PCR. Going ahead, NIMs are likely to face modest pressures on back of higher incremental lending to individuals (individual loans have lower spreads compared to non-individual loans). However, with expectations of loan book growth at a CAGR of 19.0percent over FY2014-16E, the earnings of the company are expected to grow at 16.1percent CAGR over the same period."
"Overall, we expect HDFC to post a healthy PAT CAGR of 16.1percent over FY2014–16E. The stock has gained in the recent rally and currently, HDFC's core business (after adjusting Rs283/share towards the value of its subsidiaries) trades at 3.8x FY2016E ABV, which in our view, offers limited scope for upside here on. Hence, we maintain our Neutral rating on the stock," says Angel Broking research report.
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