Recommendation: Buy (must buy!!!)
CMP = Rs 1,721
Price target: Rs 2,912
Key points:
- HDFC reported a bottom line of Rs 468.1 crore in Q1FY2009, indicating a growth of 25.6% on yoy basis and a decline of 23.4% on qoq basis. The PAT was just Rs 529 crore, below earlier estimates.
- The net interest income for the quarter was Rs 651.6 crore, up 36% yoy buoyed by a 27.6% growth in loan disbursals and a healthy improvement in the net interest margin. The healthy top line growth could not trickle down fully to the net total income due to the moderate growth (16.4% yoy) in the other operating income. Besides this the company did not report any capital gains during the quarter. The net total income stood at Rs750.3 crore, up 28.2% yoy.
- The operating expenses were up by 26.6% yoy to Rs 86.7 crore, primarily driven by a significant increase in the other expenses (up 44.8% yoy) and the staff expenses (up 35.8% yoy).
- Loan approvals during the quarter stood at Rs 9,996 crore, up 29.6% yoy in the same period last year. The disbursements during the quarter rose by almost 28% to Rs 7,204 crore from Rs 5,645 crore in the same period last year.
- At the current market price of Rs 1,721, the stock trades at 19.8x FY2009E EPS and 3.6x FY2009E book value/share.
- I maintain a strong Buy recommendation with a revised price target of Rs 2,912 over next 7-8 months.
