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HDFC 4QFY2014 performance highlights and results update

May 13, 2014, Tuesday, 13:57 GMT | 09:57 EST | 17:27 IST | 19:57 SGT
Contributed by Angel Broking

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 9.9% yoy. Advances growth slowed down to 15.9% yoy ( as compared to ~20% and above for last few quarters) aided by healthy individual advances growth at 19.7% yoy (26% yoy after adding back loans sold in last 12 months). Asset quality witnessed stability with Gross NPA at 0.69%. Overall company reported standalone earnings growth of 10.8% yoy at Rs.1,723cr.

Loan book growth lower; Asset quality remains healthy: For 4QFY2014, HDFC’s loan book grew by a moderate 15.9% yoy, with loans to the individual segment growing by 26% yoy after adding back sold loans (growth of 19.7% 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 68% of the total loan book. The spreads increased to 2.29% for FY2014 as compared to 2.25% for 9MFY2014, while the reported NIM came in at 4.1% for FY2014 as compared to 4.0% for 9MFY2014. During 4QFY2014, the asset quality continued to remain strong for the company, as its gross NPA ratio came in lower at 0.69%, as
compared to 0.77% in 3QFY2014 and 0.79% in 2QFY2014. The company continues to maintain a 100% 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 19.0% over FY2014-16E, the earnings of the company are expected to grow at 16.1% CAGR over the same period.

Outlook and valuation: Overall, we expect HDFC to post a healthy PAT CAGR of 16.1% over FY2014–16E. The stock has gained in the recent rally and currently, HDFC’s core business (after adjusting Rs.283/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.