Prabhudas Lilladher is bullish on HDFC has recommended buy rating on the stock with a target price of Rs 2274 in its research report dated May 13, 2019.
Prabhudas Lilladher's research report on HDFC
Robust revenue (33% YoY), continued strong individual loan momentum (17% YoY) and GNPA decline lead to PAT beat at Rs28.2bn (PLe: Rs27.4bn). While core book positioning strength remains intact, overall loan growth at 12% for FY19 stood tepid; loan sell downs stood elevated at Rs 252bn with FY17-18 (Rs 64.5bn FY18) backlog flowing into FY19. NIMs at 3.3% stood higher than estimates on securitization income recognition on Rs 660mn, but stood 20bps lower QoQ as funding costs caught up. The affordable loan momentum with avg. monthly approvals stands healthy at Rs14bn as against slowing corporate loan growth at 7% (v/s 17% in Q1FY19). Sequential asset quality improved as GNPA declined 4bps QoQ, absolute GNPA still grew higher 18% YoY. While our loan growth (16-18%) and NIM (3.3-3.4%) estimates spell conservatism on account of market apprehensions (competition from PSBs, falling corporate loans traction on concerns), the same stand rightly offset with improving credit costs (~30bps) and GNPA estimates at 1.25-1.3% over FY20-21. Capital sufficiency (19%+), extra provisioning and superior asset quality prompt us to reiterate BUY.
Outlook
Our TP at Rs2,274 based on SOTP metrics values HDFC at 2.7x at Mar-21 PABV incorporating slight moderation in earnings of subsidiaries on account of anticipated subdued capital markets.
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