Maintain 'BUY' on HDFC Ltd. – TP Rs.841 - Geojit BNP Paribas

- Q2FY13 PAT of Rs.1150 crores (up 18.6% YoY) was in-line with estimates. NII was lower than expected since Zero Coupon Bonds were replaced with debentures and the interest of Rs.25 crores was charged to P/L account. This was offset by higher dividend / investment income.

- Asset quality remained healthy with GNPA at 0.77%. vs. 0.79%, sequentially, & 0.82% last year.

- Approvals and disbursals for H1 grew by 18% and 21% respectively.

- Loan growth came in at 22%. 78% of the growth in the first half of FY13 was from individual loans, which grew 24%, YoY, vs. non-individual loans up 19%, YoY.

- The last few quarters have seen accelerating individual loan growth, which is positive, and this trend is expected to continue in the medium term.

- The Spread/GNPAs on individual loans were 1.96% / 0.65% vs 2.72% / 0.89% for non-individual loans, respectively.

- Conversion of warrants led to an improvement in Capital Adequacy Ratio (CAR) to 16.7% vs 14.6% in Q1FY13.

- Buy recommendation is maintained on Housing Development Finance Corporation Ltd. with a target price of Rs.841 over a period of one year.

- We prefer HDFC to HDFC Bank over the next couple of quarters. Potential moderation in wholesale rates, an improvement in housing demand and positive sentiment related to the recent hike in FDI limit in insurance are key catalysts.

Source : Equity Bulls

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