Hold HDFC; target of Rs 2200: ICICI Direct

ICICI Direct's research report on HDFC

HDFC Ltd reported higher than estimated Q2FY21 numbers led by improvement in AUM growth and steady asset quality. However, overall PAT growth was capped due to lower other income during the quarter. Asset under moratorium (by value) was at Rs 7977 crore as on September 2020 (~1.48% of AUM). Asset quality improved with GNPA ratio down ~6 bps QoQ to 1.81% (GNPA - Rs 8511 crore vs ~Rs 8631 crore QoQ). GNPA in the non-individual portfolio deteriorated to 4.19% vs. 4.1% in June 2020. Individual portfolio GNPA came in a tad lower by ~8 bps QoQ to 0.84%. Excluding asset classification norms, overall GNPA ratio would be 1.83% with individual/corporate non-performing loans at 0.88% and 4.19%, respectively. As of September 2020, collections efficiency for individual loan was at ~96.3% while collection for non-morat customers was at ~99.5%.

Outlook

We value the business at Rs 2200 per share, valuing core HFC at ~1.7x FY22E ABV and subsidiaries at 15% holding company discount. With recent run-up, we revise our rating from BUY to HOLD.

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