Q3FY21 Result Update - HDFC Ltd - ICICI Direct

HDFC Ltd posted better-than-expected profitability on account of better than estimated topline growth. Pick-up in individual business and broadly stable asset quality were also a hallmark for the quarter. Overall asset quality performance was healthy as proforma GNPA was marginally up ~8 bps QoQ to 1.91%. Proforma GNPA in individual and non-individual book was at 0.98% and 4.35% vs. 0.88% and 4.19% QoQ, respectively. Collection efficiency in individual loans for December 2020 improved to 97.6% vs. 96.3% QoQ while overall collection efficiency remained at ~92%. The quantum of loans invoked and restructured under RBI's resolution framework for Covid-19 related stress was at 0.9% of AUM (~Rs. 5010 crore), of which ~26% came from individual segment. Of total restructuring, one large account contributed ~Rs. 2600 crore (~ 0.5% of AUM). HDFC has made provisions worth Rs. 594 crore during the quarter, including Covid provisions, thus taking cumulative Covid provisions to Rs. 959 crore. Further accretion in restructuring could not be ruled out. However, provisioning buffer was at a healthy level of ~2.6% of advances vs. ~2.8% of stressed asset (1.91% proforma GNPA + 0.9% restructuring).

Valuation & Outlook

Robust individual disbursement at 26% YoY, margin expansion of 20-30 bps and collection efficiency at 97.6% (near pre Covid level) remain key characteristics of revival in individual business that comprises ~72% of book. Subdued collection and stress accretion in non-individual book is offset by provision buffer at ~2.6% of advances. Business growth led by adequate capital and healthy earnings visibility on the back of funding advantage and provision buffer keeps us positive on the fundamental strength. We expect earnings to grow at 14% CAGR in FY21-23E with healthy RoA at 2.2% in FY23E. Rolling over to FY23E estimates, we arrive at a TP of Rs. 3100 (earlier Rs. 2200), value core business at 2.6x FY23E ABV and subsidiaries at 15% holding company discount. We upgrade our rating from HOLD to BUY.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_HDFCLtd_Q3FY21.pdf

Shares of HOUSING DEVELOPMENT FINANCE CORP.LTD. was last trading in BSE at Rs.2703.85 as compared to the previous close of Rs. 2657.65. The total number of shares traded during the day was 115645 in over 7550 trades.

The stock hit an intraday high of Rs. 2733.6 and intraday low of 2618. The net turnover during the day was Rs. 311262801.

Source : Equity Bulls

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