Investor's Eye: Update - Housing Development Finance Corporation

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Investor's Eye [May 06, 2014]  Sharekhan www.sharekhan.com

Summary of Contents   STOCK UPDATE   Housing Development Finance Corporation Recommendation: Buy Price target: Rs985 Current market price: Rs877   Price target revised to Rs985; upgrade to Buy   Result highlights During Q4FY2014, HDFC reported a net profit growth of 11% YoY, driven by a healthy growth in the operating profits. Despite the tough environment the loan growth remained strong as it grew by 20% YoY with individual loans growing by 26% YoY (including Rs5,317 crore worth of loans sold in Q4FY2014).  The reported spreads expanded on a Q-o-Q basis to 2.29%, largely contributed by an increase in spreads from the developer segment (2.95% vs 2.82% in Q3FY2014). The asset quality also improved on a sequential basis due to a reduction of the NPAs from the developer segment. HDFC, being among the largest mortgage financiers, will benefit from a revival in the economy and a pick-up in the housing demand. We expect the company to grow its loans book at a healthy rate of 19% CAGR resulting in an earnings growth of 17% CAGR. We have rolled our valuations to our FY2016 estimate resulting in a revision in the price target to Rs985. Given its consistent earnings growth, sound asset quality and high return ratios, the stock should trade at premium valuations. We upgrade the stock to Buy. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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