HDFC Ltd Q2FY20 Result Update – In-line results, Steady retail growth and asset quality
· Overall AUM growth came in at 13% YoY to INR 4,90,072 cr with individual loans registering 17% YoY growth (76% of the total AUM). During the quarter, company assigned loans to the tune of INR 7,160cr to HDFC Bank Ltd; adjusting for loans sold in last 12 months, Individual loan growth would have been 24% YoY
· NII remained largely flattish despite 13% YoY AUM growth as NIMs compressed by 20 bps YoY to 3.3%. Net revenue increased by 34% YoY to INR 5,663cr largely on back of profit on stake sale in Gruh Finance (INR 1,627 cr) and high total Dividend income from subsidiaries at INR 1,074 cr during the quarter.
· Cost to Income ratio improved by 95bps YoY to 6.7% resulting in 36% YoY growth in operating profits which came in at INR 5,284 cr.
· Credit cost during the quarter improved ~14bps QoQ to 0.76%
· PAT increased by 61% YoY to INR 3,962cr on back of lower tax paid by the company and also healthy other income from stake sale and dividend income. Effective tax rate in the quarter came in at 13% as compared to 29% in Q2FY19.
· Deposits registered 30% YoY growth to INR 1,22,279cr.
· 36% of home loans approved in volume terms and 18% in value terms have been to customers from the EWS and LIG category.
· GNPA in non-individual home loans increased by 19bps QoQ to 2.87%. However, Overall asset quality remained largely stable with GNPA at 1.34% as against 1.29% in Q1FY20.
· NIMs contracted by 20bps YoY to 3.3%.
House View :
· Company has accentuated the focus on individual loans which have been growing at healthy pace. Within NBFC, Company has been gaining the market share and we believe market gains to continue going forward.
· We believe asset quality in non-individual segment to weaken further due to persisting weakness in real estate sector; however it will not have meaningful impact on overall asset quality due to miniscule share of real estate in overall loan book
At the CMP of INR 2181, stock is trading at 2.2x FY21 ABV (adjusted valuation of subsidiary companies).
|Net interest income||2,912||2,847||2||3,035||-4|
|Provisions & Contingencies||754||401||88||890||-15|
|C/I Ratio||6.7||7.6||-95 bps||7.3||-57 bps|
|Loans & Advances||4,19,455||3,76,644||11.4||4,16,597||0.69|
|GNPA (%)||1.34||1.13||21 bps||1.29||5 bps|