HDFC Ratings: Results were ahead of expectations

HDFC Ltd’s Q4FY22 effectiveness was ahead of our anticipations, with 13% y- o-y progress in core PPOP (up 8% q-o-q). Calculated NIMs expanded 15bp q-o-q supporting ~14% y-o-y NII progress. Incrementally, development is now recovering in the non-particular person phase, expanding 6% q-o-q, which was in addition to the advantage of decreased liquidity in Q4 aiding NIMs. AUM progress of 14% y-o-y (5% q- o-q) was in advance of our anticipations, with the specific phase growing at 16% y-o-y as effectively as development buying up in the non-person section (up 5% q-o-q). Disbursement momentum stays strong, with 18%/37% y-o-y growth in Q4/FY22 regardless of the superior Q4FY21 base.

Asset quality is also holding up well, with Phase-3 cutting down 40bp q-o-q to 1.9% and the large company restructured account now totally recovered. We be expecting HDFC to deliver a 14-15% CAGR in AUM, with a core home loan PPOP CAGR of 13% above FY22-25F. We keep our Purchase ranking with a lowered TP of `2,850, implying 2.1x/16x FY24F reserve/EPS (2.5x before) adjusted for the subsidiary price of Rs 1,430 at a 20% holco price reduction.

Strong traction proceeds to gain market place share: Administration highlighted that demand in the house loan section continues to be strong, and the pipeline for construction finance and LRD remains strong. Disbursement traction remains quite sturdy. HDFC has been regularly getting market share due to the fact the IL&FS disaster, with a several NBFCs vacating the place, and has been increasing a lot quicker than the banking sector as effectively.

PPOP traction robust spreads intact inspite of decreased incremental spreads: Spreads enhanced 15bp q-o-q aided by: (i) lower liquidity of `450 bn vs Rs 550 bn q-o- q and (ii) a pickup in the non-unique section.This aided 13% y-o-y and 8% q- o-q PPOP progress. Incremental spreads have been coming off in mortgages over past four months and are now 81bp vs ~100bp before. Mgmt continues to be confident the company can keep spreads specified the decide on-up in the non-unique segments and maximize in lending fees in both equally segments.

Commentary on merger: Mgmt highlighted sizeable synergy positive aspects arisingoutofmergerwithHDFCB. Distribution is anticipated to fortify materially, and cross-marketing stays a big option. This must help additional sector share gains in the home finance loan phase. In addition to this, funding price tag reduction could offer further aid to its competitive positioning.