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Prabhudas Lilladher Report
HDFC Ltd. outperformed many key players in the space both on growth and asset quality in its Q2 FY22 earnings. The company clocked healthy 4%QoQ/10%YoY loan growth with 75% of traction emerging from individual home loans and lion's share of non-individual growth from LRD.
The asset quality stood stable as GNPAs fell to 2% vs 2.2% the previous quarter. The total restructured stock at 1.4% also stands lowest in the industry with the company maintaining Stage 3 coverage at 49%.
Prepayments are down to 9% vs historical run-rate of 10 - 12%. Besides, steady-state spreads at 2.3% and NIMs at 3.6% bespeaks better liability management especially in light of competitive intensities.
The company stands ahead of the curve in proactively providing and recognising stress. Such a resilient balance sheet with sustainable quality growth (17% CAGR, <2% NPAs) and rich return profile (ROE: 21%/RoA: 2%+) over FY22-24 would continue to demand higher valuation multiple.
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