HDFC trades lower for fourth straight day

In past four trading sessions, the stock of the country's largest mortgage lender has fallen 5% as compared to 0.36% decline in the S&P BSE Sensex.

Shares of Housing Development Finance Corporation (HDFC) was trading lower for the fourth straight trading day, down 2% at Rs 1,933 per share on the BSE.

Thus far in the current week, the stock of the country's largest mortgage lender has fallen 5% after the company announced its April-June quarter (Q1FY19) results. On comparison, the S&P BSE Sensex was down 0.36% in past four trading sessions. It touched an all-time high of Rs 2,051 on Monday in intra-day trade.

HDFC had posted 54% rise in net profit to Rs 21.90 billion in Q1FY19. It had registered a net profit of Rs 14.24 billion in the April-June quarter of the previous fiscal. The net interest income, interest revenues minus interest expenses, in the reporting quarter rose by 20% to Rs 28.90 billion, compared to Rs 24.12 billion in the year-ago quarter. The Net Interest Margin (NIM) stood at 3.5% in the last quarter.

Overall asset quality remained largely stable quarter on quarter (qoq), as gross non-performing loans or GNPLs (90-dpd) stood at 1.18% vs 1.11% in Q4FY18. Corporate GNPLs remained elevated at 2.32%. Asset quality in individual loans remained healthy with GNPLs largely stable at 0.66%.

“HDFC has managed its loan growth in guided territory of 17-18% which we believe will be maintained in coming quarters. Value unlocking of subsidiaries may continue in FY19 as well,” anaysts at Emkay Global Financial Services said in results update. The brokerage firm upgraded rating to ‘Accumulate’ with price target of Rs 2,264 (4.7x FY20E book).

“We believe the recent equity infusion (Rs 130 billion, including QIP), along with the impending warrant conversion in FY19 should provide some cushion to NIM. HDFC Limited has already announced sale of around 4% stake in its AMC business which is likely to fetch around Rs 9.5 billion additional profit to the company in FY19E which we are building in our estimates,” it added.

“Overall a solid set of numbers with strong loan growth, stable margins, and contained asset quality. HDFC, we believe, remains the best play to capture a property upcycle that we expect to start in 2018 after a prolonged downturn driven by 15 year+ high affordability across major Tier 1 and 2 cities. Adjusted for the value of subsidiaries, the HDFC’s core mortgage business offers good value with decent earnings growth and ROE, in our view,” JP Morgan said with ‘overweight’ on the stock and price target of Rs 2,300.

"After three years of mid-teens growth over FY14-17, HDFC seems to be accelerating towards high teen's growth. This is especially significant since smaller & regional players are finding it tough to grow. HDFC's wide geographic presence across the housing value chain will ensure 17% CAGR over FY18-20E. Also, the tight liquidity environment will make it difficult for fringe players to compete with HDFC", analysts at Antique Stock Broking said.