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MOSL: HDFC (Buy)-AUM growth in line-Margins surprise leads to PAT beat

HDFC: AUM growth in line; Margins surprise leads to PAT beat

(HDFC IN, Mkt Cap USD47.6b, CMP INR1952, TP INR2330, 19% Upside, Buy)

 

• PAT grew 27% YoY to INR28.6b in 4QFY19, 24% ahead of our estimate, driven by the better-than-expected spreads performance (+20bp QoQ; NII – 11% beat) and lower opex (5% beat). Asset quality was stable sequentially, with GS3 % at 1.41% (-3bp QoQ)
• AUM rose 4.7% QoQ/15% YoY to INR4.6t – growth continues to be driven by individual loans (+17% YoY to INR3.4t). Interestingly, despite ~4x jump in the quantum of loan assignments to INR250b in FY19, the upfront income on assignment was up by only ~60% YoY to INR8.6b in the year.
• Comparatively, core NII on loans jumped strongly by 11% QoQ to INR25.9b, driven primarily by lower interest expense (-1% QoQ, despite 3% QoQ increase in borrowings). The company hiked wholesale lending rates by average 65bp and retail lending by 20bp in 2HFY19. The borrowing mix remained unchanged sequentially. On a reported basis, spreads improved to 2.3% in FY19 from 2.26% in 9MFY19, implying a 20bp QoQ rise in spreads.