MOSL: DEWAN HOUSING (Buy)-Growth trajectory robust-loan yields under pressure

DEWAN HOUSING: Growth trajectory robust; loan yields under pressure

(DEWH IN, Mkt Cap USD3b, CMP INR649, TP INR765, 18% Upside, Buy)

• Dewan Housing Finance's (DEWH) 4QFY18 PAT (adjusted for stake sale in insurance JV in 4QFY17) grew 26% YoY to INR3.1b (2% above estimate).
• Disbursements in the quarter were up 81% YoY to INR158b, resulting in 33% YoY AUM growth (fastest growth in the past 18 quarters). This was driven by 23% YoY AUM growth in the core home loan segment and 52% YoY growth in the non-core segment. The share of non-core loans now stands at 39% v/s 37% in 3QFY18 and 34% in 4QFY17. Management has guided for 22% AUM growth in FY19.
• Calculated yield on AUM declined 35bp QoQ (-130bp YoY) to 10.0%, while cost of funds was largely stable QoQ/YoY at 8.84%. Borrowing mix was largely unchanged sequentially, with banks accounting for 42% of total borrowings, followed by capital markets (40%) and others (18%).
• C/I ratio (calc.) declined 90bp YoY to 26.3%. DHFL's focus on reducing opex is bearing fruit - C/I ratio declined 450bp to 25% over FY16-18.
• Asset quality was stable, with the GNPA ratio at 0.96%.
• For the full-year FY18, PAT (excl. one-offs) was up 26%, resulting in calc. RoA/RoE of 1.2%/14%.