Religare targets Dewan Housing at Rs 302
Religare Research has initiated coverage on Dewan Housing Finance Corporation with a ‘buy’ recommendation for target price of Rs 302.
By INDIATIMES NEWS NETWORK |
MUMBAI: Religare Research has initiated coverage on Dewan Housing Finance Corporation with a ‘buy’ recommendation for target price of Rs 302. Dewan Housing Finance is part of the Wadhawan group, which also includes HDIL. The company has over two decades of experience in lending in tier II and tier III cities, niche positioning with a focus on providing housing loans to lower and middle income segments as well as project finance.
The company has strong distribution network comprising 54 branches and 69 service centres, with plans for a four-fold increase in branches in order to expand the asset base from Rs 3,600 crore to Rs 10,000 crore in the next 2-3 years.
DHFL has steadily captured market share from money lenders in tier II and tier III cities, while maintaining low non-performing assets of 1.2 per cent. Strong experience in the small loan segment can be leveraged for accelerated growth in the coming years.
Margins are expected to improve to 3 per cent with over 70 per cent of loan disbursals attracting floating rates and with the repayment of high-cost borrowings. This together with the higher asset base would translate to net profit of Rs 200 crore in the next 2-3 years from the core business, Religare says.
Unrealised gains of Rs 200 crore on shares of HDIL and a capital adequacy ratio of 17 per cent would support strong business growth. DHFL owns sizeable stake in a real estate venture fund where the 2:20 structure would contribute significantly to the bottomline by way of fees and carry income.
The company has acquired 19.9 per cent equity in promoter-owned Wadhawan Food-Retail, operator of the Spinach store chain, which will expand to 225-250 stores by March 2008 and earn revenues of Rs 600 crore. This is expected to increase manifold over the next five years and would add significant value to the company. Core lending business (excluding DHFL Vysya and HDIL) trades at 1.1 times its book value and 1.2 times adjusted book value on 2008-09 estimate.
The brokerage values the company at Rs 302, after considering core business at Rs 212 per share (2.6x of FY09E ABV), and stakes in DHFL Vysya, HDIL and Wadhawan Food-Retail at Rs 90 per share.
The company has strong distribution network comprising 54 branches and 69 service centres, with plans for a four-fold increase in branches in order to expand the asset base from Rs 3,600 crore to Rs 10,000 crore in the next 2-3 years.
DHFL has steadily captured market share from money lenders in tier II and tier III cities, while maintaining low non-performing assets of 1.2 per cent. Strong experience in the small loan segment can be leveraged for accelerated growth in the coming years.
Margins are expected to improve to 3 per cent with over 70 per cent of loan disbursals attracting floating rates and with the repayment of high-cost borrowings. This together with the higher asset base would translate to net profit of Rs 200 crore in the next 2-3 years from the core business, Religare says.
Unrealised gains of Rs 200 crore on shares of HDIL and a capital adequacy ratio of 17 per cent would support strong business growth. DHFL owns sizeable stake in a real estate venture fund where the 2:20 structure would contribute significantly to the bottomline by way of fees and carry income.
The company has acquired 19.9 per cent equity in promoter-owned Wadhawan Food-Retail, operator of the Spinach store chain, which will expand to 225-250 stores by March 2008 and earn revenues of Rs 600 crore. This is expected to increase manifold over the next five years and would add significant value to the company. Core lending business (excluding DHFL Vysya and HDIL) trades at 1.1 times its book value and 1.2 times adjusted book value on 2008-09 estimate.
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The brokerage values the company at Rs 302, after considering core business at Rs 212 per share (2.6x of FY09E ABV), and stakes in DHFL Vysya, HDIL and Wadhawan Food-Retail at Rs 90 per share.
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