On subsidiaries front, life and general insurance revenues grew 8%/25%YoY respectively. Asset management business stood tepid as the revenues grew mere 5% YoY. While we moderately tweak our provision estimates higher, affordable housing focus and optimistically cautious lending traction prompt us to value core mortgage business at 2.1x PABV Sep’21e. With acquisition in general insurance at play and consistent value add from subsidiaries, the latter now contributes 59% to our SOTP price of Rs2,361 (earlier Rs 2,365). Reiterate ACCUMULATE.
GNPA increased 11bps YoY in Q1FY20 to 1.3% (vs. 1.2% in Q4FY19). Net profit stood at Rs 3,203cr in Q1FY20, a growth of 46.3% YoY, driven by proceeds from the sale of GRUH Finance. We maintain our HOLD rating on the stock, with a revised target price of Rs 2,284, based on SOTP valuation.
Best of the lot, outlook improves as supportive measures providea boost: HDFC is currently available at ~4x its FY2021E BV, which we believe is reasonable considering its strong operating metrics, consistency and sustainable business model. Despite the NBFC industry facing challenges, we expect the consistency and relative outperformance of HDFC will help it to sustain premium valuations. Going forward, improving appetite for HDFC’s sell-down/funding paper will result in pricing advantage. For the past year, while strong NBFCs were able to raise funds (from banks), it was at a higher cost and HDFC alsosaw a 5 BPS impact on its spreads in Q1. In our view, AUM growth should remainhealthy (on market share gains) with upside potential for spreads. We believe the outlook for HDFC has improved with supportive government measures, which will provide growth momentum with potential of margin expansion. We maintain our Buy rating on the stock with an unchanged PT of Rs. 2,500.
While HDFC maintains competitive superiority the spreads should stand maintained, however, GNPA and loan traction (15%) should see slight downward pressures for FY20. Against this backdrop, we trim our core book multiple to 2.6x (earlier 2.7x) arriving at TP of Rs2,270 (earlier Rs 2,274) at Mar-21 PABV. Downgrade to ACCUMULATE.
HDFC is currently available at ~4x its FY2021E BV, which we believe is reasonable considering strong operating metrics, consistency and sustainable business model. While the NBFC industry faces its own challenges, the consistency and relative outperformance of HDFC will help it to sustain premium valuations. We maintain our loan growth estimates over FY2019-FY2021, intact at a ~16% CAGR, considering easein competition, HDFC’s diversified liability franchise and higher coverage.In our view, AUM growth should remain healthy (on market share gains)with spreads maintained (diversified liability franchise but cautious stanceof management on riskier assets) and well-contained credit costs. We maintain our Buy rating on the stock with an unchanged PT of Rs. 2,500.
HDFC is trading at 4.1x of its FY2021E book value, which we believe is reasonable considering strong operating metrics, consistencyand sustainable business model. While the NBFCindustry faces its own challenges, the consistency and relative outperformance of HDFC will help itto sustain premium valuations. We maintain ourBuy rating on the stock with a revised price target(PT) of Rs 2,500.
HDFC is available at 3.7x its FY2021E book value, which we believe is reasonable considering its strong operating metrics, consistency and sustainable business model. Thus, we maintain our Buy rating on the stock with an unchanged price target (PT) of Rs. 2,300.
HDFC has maintained a cautious stance on the wholesale segment over the last five years (~13% CAGR), when the sector was growing at a rapid pace. The share of wholesale in overall AUM has declined 350bp+ to 29% over FY14-19. In the current stress liquidity period for NBFCs, the preference of debt markets/banks would be toward well-established and strong parentage companies, and HDFC is well placed to capitalize on this. The company is sitting with strong capitalization (Tier I 17.6%) – networth has doubled (to INR737b+) over FY17-19, helped by a capital raise of INR120b+, warrant conversion of INR55b+ and strong internal accruals. We largely maintain our estimates. Maintain Buy with an SOTP-based TP of INR 2,330.
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. 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.