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MOSL : MOrning India (1/August/22): 1. HDFC (NIM compression transitory, expect it to recover); 2. Sun Pharma; 3. IOCL; 4. DLF; 5. Cipla; 6. Bank of Baroda

MOrning India (1/August/22): 1. HDFC (NIM compression transitory, expect it to recover); 2. Sun Pharma; 3. IOCL; 4. DLF; 5. Cipla; 6. Bank of Baroda

 

Today’s top research idea

HDFC: NIM compression transitory, expect it to recover

• NIM compression was due to: a) transmission lag in passing of higher borrowing costs, and b) absence of benefits of low rates on overnight interest swaps (OIS), which was present in 1QFY22.
• We expect margin to recover over the remainder of FY23. With overall provisions at 2.3% of EAD, HDFC has made adequate provisions for any contingencies in asset quality.
• We expect credit costs to moderate from hereon. Asset quality exhibited strength across both Individual and Non-Individual segments.
• We expect HDFC to deliver an AUM and PAT CAGR of ~14% each over FY22- 24, which will translate into a core RoA/RoE of 2%/14% in FY23/FY4. We reiterate our Buy rating on HDFC with a TP of INR2,830 (premised on Mar'24E SoTP).

• Piping hot news

  5G spectrum auction: Bids cross Rs 1.5 trn; UP East sees renewed interest

  The auction of 5G spectrum capable of offering ultra-high-speed internet received bids worth Rs 1,50,130 crore until Sunday amid pick-up in demand for radiowaves in the UP East circle, pushing the bidding to seventh day on Monday. The auction of 5G spectrum capable of offering ultra-high-speed internet received bids worth Rs 1,50,130 crore until Sunday amid pick-up in demand for radiowaves in the UP East circle, pushing the bidding to seventh day on Monday