| Kotak Securities HDFC-BUY; Tgt Rs 3200 Should we be looking at LIC Hsg, GIC Hsg and Can Fin Homes?
Credit Demand remains strong across geographies
We expect HDFC to deliver 24% loan growth (pre-securitization Large business drivers are Bangalore, Chennai, cities in Gujarat, and Pune. Prices in Mumbai and NCR are back to an all-time high (or higher in some pockets) though real estate sales have not yet shown signs of slowing down and developers continue to launch new projects. KIE real estate research indicates that companies in the sector will report strong growth in FY2011E as well – revenue from real estate sales will likely increase by about 40% yoy (driving disbursements) and bookings will rise by 20-25% yoy. Real estate prices in most parts of the country are close to historic peaks even as sales remain strong; the affordability index is just above 2006 levels. Reported growth will be front loaded
The momentum in the sector normally peaks during 4Q. HDFC's business picked up in 2HFY10 and retail growth was back-ended during FY2010. With continued strong momentum in FY2011E, the growth is likely to be front loaded (reported growth in 1HFY11E is likely to be much higher than 2H); disbursements and loan growth may be lower on a high base in 4QFY11 though yoy growth will remain in the range of 20-25%.
Spreads will likely remain stable
We believe HDFC's spreads will remain stable yoy in FY2011E as the rise in borrowings cost is offset by higher home loan rates. Unlike FY2009, the rise in interest rates is not sudden; the liquidity crunch is unlikely to be severe. We believe the banking sector will incrementally reduce its focus on mortgages as other segments will also likely pick up. Notably, over the last 2-3 months, large banks have not launched any new home loan product. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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