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MOSL: HDFC (Buy)-Consistent healthy performance amidst tough macros

HDFC: Consistent healthy performance amidst tough macros

(HDFC IN, Mkt Cap USD58b, CMP INR2396, TP INR2875, 20% Upside, Buy)

 

• HDFC reported another quarter of consistent performance with healthy AUM growth of ~14% YoY, stable spreads of ~2.3% and largely flat GS3% of 1.6%. HDFC wrote off ~INR4b during the quarter, led by settlement in 8-10 corporate accounts.
• Core PBT (adj. for one off/lumpy income/exp) was in line at INR27.7b (flat YoY). While NII grew 11% YoY, lower assignment income (INR1.7b v/s INR2.6b YoY), higher opex (+14% YoY) and provisions led to flat core PBT.
• We largely maintain our estimates on core PBT, and expect a CAGR (FY20-23) of ~12% in NII and ~14% in AUM. We expect core RoAA of 1.9% and RoE 14-15% over the same period. 

AUM growth driven by Retail; marginal pick-up in Corporate

• AUM increased 14% YoY (+3% QoQ) to INR5t, driven by 16% YoY growth in retail AUM. Note that retail lending growth has remained healthy at 16-18% with stable individual spreads of ~1.9% since the IL&FS crisis.
• Corporate loans grew 6% YoY (less than 5% in 1Q/2Q) to INR1.3t. We expect the company to be a bit opportunistic in this segment. Reported spreads in this business improved to 3.26% in 3Q from ~3.1% in the last two quarters. 

Flexibility on liability side - a key strength

• The quarter witnessed some moderation in deposits accretion - INR31b in 3Q v/s the quarterly run-rate of ~INR90b in 1H. Overall deposits grew ~4% QoQ and ~20% YoY to INR1.3t - 32% of liabilities.
• As bank borrowings are becoming cheaper and funding lines are easily available for larger players, HDFC grew its share to 22.8% (+130bp QoQ).