'Hold' HDFC: Indiabulls Securities
Current prices of HDFC do not merit position building, and therefore, Indiabulls Securities maintains the `Hold’ rating.
HDFC
RESEARCH: INDIABULLS SECURITIES
RATING: HOLD
CMP: RS 2310.80
Current prices of HDFC do not merit position building, and therefore, Indiabulls Securities maintains the `Hold��� rating. HDFC���s Q1FY10 net profit declined 23% q-o-q to Rs. 560 crore driven by a sharp fall in the net interest income (NII) and in the fee and charges. While the growth in its loan-book and in other operating income was satisfactory, the contraction in spreads resulting in the decline of NII is a cause for concern.
Presently, the stock trades at a P/B multiple of ~4.7x, which is fairly high given the uncertainty regarding its insurance businesses. HDFC���s net interest income remained almost flat (+2.6% y-o-y ), and declined by 23.2% q-o-q to Rs. 670 crore, following the trend displayed by its average spreads. The year-over-year average spread declined because of a rise in the cost of funds.
However, the sequential fall was driven by a sharp dip in yields. Indiabulls estimates the average spread for Q2FY10 at 2.17%. At the close of the first quarter, the assets under management (AUM) stood at Rs 72,500 crore, an increase of 25% sequentially, and 37.5% y-o-y . Expectedly, the proportion of equity has grown from 26% in March ���09 to 28% in June ���09; in line with the recovery in the equity markets. With rising equity markets, the equity component of mutual funds is to continue increasing.
RESEARCH: INDIABULLS SECURITIES
RATING: HOLD
CMP: RS 2310.80
Current prices of HDFC do not merit position building, and therefore, Indiabulls Securities maintains the `Hold��� rating. HDFC���s Q1FY10 net profit declined 23% q-o-q to Rs. 560 crore driven by a sharp fall in the net interest income (NII) and in the fee and charges. While the growth in its loan-book and in other operating income was satisfactory, the contraction in spreads resulting in the decline of NII is a cause for concern.
Presently, the stock trades at a P/B multiple of ~4.7x, which is fairly high given the uncertainty regarding its insurance businesses. HDFC���s net interest income remained almost flat (+2.6% y-o-y ), and declined by 23.2% q-o-q to Rs. 670 crore, following the trend displayed by its average spreads. The year-over-year average spread declined because of a rise in the cost of funds.
However, the sequential fall was driven by a sharp dip in yields. Indiabulls estimates the average spread for Q2FY10 at 2.17%. At the close of the first quarter, the assets under management (AUM) stood at Rs 72,500 crore, an increase of 25% sequentially, and 37.5% y-o-y . Expectedly, the proportion of equity has grown from 26% in March ���09 to 28% in June ���09; in line with the recovery in the equity markets. With rising equity markets, the equity component of mutual funds is to continue increasing.
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