X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
HDFC: Competition ahead - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 11, 2001

    HDFC: Competition ahead

    HDFC has maintained its financial performance since the last few quarters despite sluggish economic environment. This is due to buoyant growth in the housing finance market fueled by higher tax incentives given in the budget.

    The company is set to declare its second quarter results in the next week. During the first quarter, HDFC reported 25% jump in profits on a revenue growth of 15%. HDFC has continuously improved its operating margins by reducing its cost of funds. The company is planning to tap overseas market for raising around 100 m yen for lending purposes. The interest rate for the loan is estimated to be about 300 basis points lower than the domestic prime-lending rate. An important point to note here is that housing companies are exempted from paying withholding tax on foreign currency borrowings. ECB route recently suffered a blow due to imposition of withholding tax ranging from 10%-25%. Raising foreign currency loan would help HDFC in reducing its cost of funds further and increase interest spread.

    HDFC is expected to maintain its growth trajectory in the second quarter. With an improvement in operating margins and low depreciation charges, HDFC’s profits are projected to grow by over 18% in the second quarter.

    Financial snapshot
    (Rs m) 2QFY00 2QFY01 Change 2QFY02E Change
    Income from Operations 4,839 5,862 21.1% 6,741 15.0%
    Other Income 6 38 495.2% 10 -73.3%
    Total Income 4,845 5,899 21.8% 6,751 14.4%
    Interest Expense 3,434 4,211 22.6% 4,786 13.7%
    Operating profit 1,405 1,651 17.5% 1,955 18.4%
    Other Expenses 189 230 21.8% 257 11.5%
    Depreciation 120 112 -6.3% 101 -10.0%
    Profits Before Tax 1,102 1,346 22.1% 1,607 19.4%
    Tax 131 182 39.2% 225 23.4%
    Net Profits 971 1,164 19.8% 1,382 18.8%
    No. of shares (m) 119.1 119.1   119.1  

    Performance measures
    Particulars 2QFY00 2QFY01 2QFY02E
    OPM 29.0% 28.2% 29.0%
    Tax / PBT 11.9% 13.5% 14.0%
    NPM 20.0% 19.7% 20.5%
    Cash EPS (Rs) 36.6 42.9 49.8
    EPS (Rs) 32.6 39.1 46.4

    Although, the housing finance market is growing at a strong rate (20%), entry of banks and financial institutions in the industry has increased the pressure on yields in the business. HDFC's ability to maintain growth and margins amidst competition will be critical for its future performance.

    The company’s foray into the insurance and mutual fund businesses will provide diversity to its business profile in future. However, due to a longer gestation period and high degree of competition, the insurance business is not expected to breakeven before the next 5 years.

    At the current market price of Rs 672, HDFC is trading at a P/E of 13x and Price/Book value ratio of 3x FY02 consolidated projected earnings. It is one of the most valued stocks in the finance sector. Following the recent hike in the sectoral cap by the RBI to 100%, HDFC has raised FII limit to 74%. (As on March ’01, FIIs and FDI were cumulatively holding 64% in the company). This could technically generate demand for the stock considering its strong fundamentals.

     

     

    Equitymaster requests your view! Post a comment on "HDFC: Competition ahead". Click here!

      
     

    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    HDFC: High Provisioning Drags Down Earnings Growth (Quarterly Results Update - Detailed)

    Feb 7, 2017

    HDFC declared its results for the third quarter (3QFY17). The institution has reported 18.4% YoY growth in net interest income while net profits have grown by 11.9% YoY during 3QFY17.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    HDFC SHARE PRICE


    Aug 21, 2017 03:37 PM

    TRACK HDFC

    HDFC - GIC HOUSING COMPARISON

    Compare Company With Charts

    COMPARE HDFC WITH

    MARKET STATS