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HDFC Results – The Gold of Indian Equity – Buy HDFC, Not Gold

July 14, 2011

HDFC announced its quarterly results and it is a script written by Mr. deepak Parekh a deade ago and it continues to be played in the same style. 20% Growth rate 🙂 I have been observing this stock for the past 15 years when I first bought it and despite Gloom or Boom, it maintains its own growth trajectory delivering consistent returns like Gold. [HDFC Outperforms Returns Delivered by the Yellow Metal] Low NPA, Strong Management, High Dividends, etc makes it enjoy higher discounting than the rest in the crowd.

HDFC reported 1Q12 net profit of Rs8.45bn up 22% y/y inline. Adjusted loan book growth (sale of loans) was robust at ~25% y/y driven by strong individual loan growth (adjusted) at 26% y/y. In spite of rising rates, sanctions and disbursements growth remained strong at 22% y/y and 20% y/y.

Asset quality remains comfortable, with gross at 83bps (up 6bps qoq, but seasonal), with HDFC carrying excess provision of +Rs3.0bn in case NHB enforces 40bps on standard assets. Tier 1 at 12.2%.

Across the board, Analysts expect earnings growth to sustain at a robust 20% over FY11- 13 and core ROEs at a high of 24–26%. With the core mortgage business currently at 20x FY12 earnings.

HDFC’s FY 2012 EPS is expected to be between Rs 28 to Rs 30 with a Stock Target Price between Rs 700 to Rs 800.

How We BUY HDFC Stock for our Clients?
We have clients with moderate Risk Appetite and who still want to better returns. Whenever their is a SELL OFF in Equities, HDFC is the stock for them 🙂 Add to their Portfolio. Also, note that we HOLD it for a Long Term Period [5+ years] and Returns will be 20% CAGR.

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