HDFC Motilal 300813
Transcript of HDFC Motilal 300813
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Alpesh Mehta([email protected]); +91 22 3982 5415
Sunesh Khanna ([email protected]); +91 22 3982 5521
29 August 2013
Update | Sector: Financials
HDFCCMP: INR654 TP: INR889 Buy
Superior execution and consistent performanceResilient on macros; return ratios to remain superior
Housing Development Finance Corp (HDFC) has corrected by 23% andunderperformed the Nifty by 11% since the Reserve Bank of Indias (RBI)
tightening of system-wide liquidity on July 15, 2013. This was on the back of rising
investors concerns over higher cost of funds (impacting spreads) and increasing
stress in the real estate segment.
In the current uncertain macro-economic conditions, HDFC is likely to be the mostresilient in asset quality (cash flow-based lending, strong collateral in place etc)
and growth (structural factors to aid). Subsidiaries/associates are self-funded and thus further dilution is not needed to
take care of their capital requirements; strong internal accrual (core lending RoE
of 26%+) will take care of HDFCs loan growth requirements.
Based on assets and liability side flexibility, spreads shall remain in the range of2.15-2.35%.
Led by stable spreads, single digit cost to income ratio and superior asset quality,return ratios are expected to remain above industry average, with core RoA of
~2.5% and core lending RoE of ~26%.
In the best lending asset class; growth, asset quality to remain healthy
On the back of latent housing demand and structural growth drivers, we believe
18-20% growth will not be a difficult target for HDFC. Though, select urban and
metro markets are witnessing a slowdown in disbursements, company has
ramped up distribution in Tier II and III centers where demand remains buoyant
and is driving growth. No major job losses, lower LTV (65%) and installment to
income ratio (~40%), financing of immovable real asset and the cardinal
principal of lending against cash flows shall keep retail asset quality healthy, in
our view. On the corporate side, prudent risk management, strong security
cover and higher dependence of developers on HDFC shall ensure healthy asset
quality.
Diversified balance sheet mix to ensure stability in spreads
Flexibility in asset (AUM mix individual-corporate at 69:31) and liability side
(deposits 33%, bank loans 8% and rest through bonds, CPs etc) helps HDFC to
maintain spreads at ~2.15-2.35% across cycles. In our view, in case of a
prolonged tightness in the liquidity situation, company will prefer to raise the
lending rates (already up 25bp in current liquidity tightness) and maintain
spreads, than chase growth.
Guzzling subsidiaries turn enablers of capital
Most of HDFCs subsidiaries have grown sizably and become self-sufficient to
fund their growth. Further capital infusion in the life insurance business is not
needed as it is profit making now. With the healthy Tier I ratio of 10.5%+, RoE of
BSE Sensex S&P CNX
17,996 5,285
Stock Info
Bloomberg HDFC IN
Equity Shares (m) 1,554.7
52-Week Range (INR) 931/632
1, 6, 12 Rel. Per (%) -11/-9/-12
M.Cap. (INR b) 1,011.3
M.Cap. (USD b) 14.9
Financial Snapshot (INR b)
Y/E March 2013 2014E 2015E
NII 61.8 73.7 88.6
PAT 48.5 56.3 66.4
Adj. EPS * 26.2 30.8 36.7
BV/Share* 161.7 180.9 201.3
ABV /Sh* 108.5 127.8 148.2
RoAA (%) 2.7 2.6 2.6
Core RoE 23.8 25.6 26.1
AP/E (x) 16.7 13.0 9.7
P/BV (x) 4.0 3.6 3.2
AP/ABV (x) 4.0 3.1 2.4
* Adjusted
Shareholding pattern %
Jun-13 Mar-13 Jun-12
Promoter 0.0 0.0 0.0
Dom. Inst 12.7 12.9 15.1
Foreign 74.1 74.2 71.3
Others 13.2 12.9 13.6
Stock Performance (1-year)
Investors are advised to referthrough disclosures made at the
end of the Research Report.
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23-24% and growth rate of 20-25%, HDFC Bank is unlikely to raise capital over
the next 12-15 months. In the medium term, increase in foreign ownership limit
will provide capital (listing/stake dilution) to HDFC Ltd, which in turn can be
used to fund HDFC Bank if needed.
Reiterate Buy with SOTP-based target price of INR889; upside 36%
Stable spreads across interest rate cycles, impeccable asset quality track record
and single digit cost to income ratio shall ensure superior core lending business
RoA of 2.4-2.5% and RoE of 26%+. We expect HDFC to report core EPS of
INR31/37 in FY14E/15E (FY13-15E EPS CAGR of ~18% on a base of 15% over
FY08-13). The Adjusted Book Value (adj. for investments in subsidiaries) would
be INR128/148 in FY14E/15E. The stock trades at a core PE of 13/9.8x
FY14E/15E (24% lower compared with its historical average of 17-18x). Buy.Buy for upside of 36%
SOTP FY15E Based (INR)Value
(INR b)
Value
(USD b)
Value/
Sh. (INR)% of total Rationale
Core business 917 13.5 593 66.74x FY15 Adjusted BV (for investments in subs and
HDFC Bank, Implied P/E of 16x Core EPS)
Key Ventures
HDFC Bank 410 6.0 265 29.8 Valued at INR755/share 3.5x FY15E BV
HDFC Standard Life (72.5% stake) 107 1.6 69 7.8 Appraisal Value; Economic Stake - 72.5%
HDFC AMC (60% stake) 30 0.4 19 2.2 4% FY15E AUM, 15x FY15E PAT
Property Funds 7 0.1 4 0.5 13.3% of total AUM USD1.1b
HDFC General Insurance (74% stake) 7 0.1 4 0.5 Last stake sale value + 20%
Gruh Finance 13 0.2 8 0.9 Valued at 3x FY15E BV
Total Value of Ventures 573 8.4 370 41.7
Less: 20% holding discount 115 1.7 74 8.3
Value of Key Ventures 458 6.7 296 33.3
Target Value Post 20% Holding Company
Discount1,375 20.2 889 100.0
CMP 1,011 14.9 654
Upside - % 36.0 36.0 36.0
Target Price w/o 20% Holding Company
Discount1,490 21.9 963
CMP 1,011 14.9 654
Upside - % 47 47 47
Source: Company, MOSL
Consistent performance in growth, profitability and asset quality
Source:Company, MOSL
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Consistency, a hallmark; in best lending asset classGrowth and asset quality to remain healthy
On the back of latent housing demand and structural growth drivers, we believe18-20% growth will not be a difficult target for HDFC.
No major job losses, lower LTV (65%) and installment to income ratio (40%), financingof immovable real asset and the cardinal principal of lending against cash flows shall
keep retail asset quality healthy, in our view.
On the corporate side, prudent risk management, strong security cover and higherdependence of developers on HDFC shall ensure healthy asset quality.
Structural factors in place; long term opportunity remains sizable
HDFC remains well positioned in a business segment where secular growth drivers
are in place and could support loan CAGR of ~20% in the near-to-medium term.
Factors such as expected healthy economic growth, higher disposable incomes,
improved affordability and latent demand for housing remain the major volume
drivers for industry players. Further, the increase property prices will also add to
overall growth of players; HDFC being a market leader in the housing finance
industry has been able to reap these benefits. With the addition of newer sources of
distribution over the last decade, we believe it is strategically well placed to
capitalize on the longer term opportunity.
Retail AUM growth has been consistent across rate cycles
Source: MOSL, Company
HDFCs retail AUM growth ~2x of nominal GDP growth
Source: MOSL, Company
HDFC: Retail growth outpaces banks home loan growth
Source: MOSL, Company
Increased affordability aids mortgage growth
0
6
12
18
24
0.0
1.3
2.5
3.8
5.0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Proper ty Value (INR m; LHS)
Annual Income (INR m; LHS)
Affordability (x)
Source: MOSL, Company
Structural factors like
mortgage under-
penetration, urbanization,
latent housing demand will
keep the near to mediumterm growth rates at 18-
20%
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Tailwinds to keep near term growth too healthy despite macro concerns
While near term macro uncertainty has raised questions related to growth, in our
view, flexibility on asset side (to shuffle between wholesale and retail), increased
presence (helped by strong distribution network of group companies) in Tier II and
III cities and disbursements of already sanctioned loans will aid near term growth.
We have factored loans CAGR of ~19% over FY13-15E.
HDFC: Prudently keeps AUM mix constant
Source: MOSL, Company
Incremental AUM mix: Retail share increased in FY13
Source: MOSL, Company
Share of associate companies increased in overall sourcing of loans
36 40 4446 46 47 46
2427 29 30 30 28 28
35 3022 18 16 14 11
5 3 5 6 8 11 15
FY07 FY08 FY09 FY10 FY11 FY12 FY13
HDFC Sales Pvt. Ltd. HDFC Bank Direct Walk-ins DSAs
Source: MOSL, Company
Best collateralized product for lending; asset quality not much of a concern
Conservative lending policies and superior credit appraisal skills have led to superior
asset quality for HDFC.As in June 2013, gross NPLs (90 days overdue) were 0.77% ofloans and GNPLs (180 days overdue) at 0.38%, which have been adequately
provided, resulting in zero NNPAs. 1QFY14 was the 34th
consecutive quarter wherein
GNPA (%) declined on a YoY basis. HDFC, through its conservative provisioning
policy, has always maintained a buffer for contingencies. As in June 2013,
outstanding provisions for contingencies stood at INR18b, against the stipulated
requirement by the National Housing Bank (NHB) of INR13.3b (of which INR9.1b is
for standard assets).
1QFY14 was the 34th
consecutive quarterwherein GNPA (%) declined
on a YoY basis.
Direct walk-in which
contributed 35.8% of
incremental loan sourcing
in FY07, reduced to 11%
in FY13
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Stable spreads across various rate cyclesDiversified balance sheet mix to ensure stability
Flexibility in asset (AUM mix: individual-corporate at 69:31) and liability side (deposits33%, bank loans 8% and rest through bonds, CPs etc) helps HDFC to maintain spreadsat ~2.15-2.35% across cycles.
In our view, in case of prolonged tightness in liquidity situation, company will prefer toraise lending rates and maintain spreads, than chase growth.
Unmatched performance in spreads
HDFC has demonstrated its superior asset-liability management skills by maintaining
spreads in a narrow band of 2.15-2.35% across various cycles. Despite large part of
borrowings being in the form of wholesale or bank term loans, company has been
able to maintain spreads within a narrow range, which is commendable. Diversified
funding mix, aggressive utilization of securitization as a source of funding (ifmanagement decides) and well-matched ALM shall help HDFC to keep spreads
stable at ~2.2% levels.
Stable spreads across interest rate cycles
1.0
1.5
2.0
2.5
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jun06
Jan07
Jun08
Nov08
Mar09
Apr10
Sept10
Mar11
Jul11
Oct11
Mar13
Re po Rate (%) (lhs) Spre ads(%) (rhs)
Source: MOSL, Company
Stable spreads even in extremely tight liquidity scenarios
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
-1500
-1000
-500
0
500
1000
1500
Q32005
Q12006
Q32006
Q12007
Q32007
Q12008
Q32008
Q12009
Q32009
Q12010
Q32010
Q12011
Q32011
Q12012
Q32012
Q12013
Q32013
Q12014
Avg LAF(INR b) Spreads (%)
Source: MOSL, Company
Higher short term rates lead to rise in fixed rate liabilities
7780
78
85
75
71
81 8279
87
84 84
FY08 FY09 FY10 FY11 FY12 FY13
Floating rate assets (%) Floating Rate Liabilities (%)
Source: MOSL, Company
Well-matched ALM (Liabilities-assets) across buckets (INR b)
-3
25
-15-7
6
-22-29
-15
4
36 37 3432
-10
11
-29-43
-12
FY08
FY09
FY10
FY11
FY12
FY13
Upto 1 year 1-5years >5years
Source: MOSL, Company
Recent tightness unlikely to result in spreads compressionBased on evolving liquidity (pressure on cost of funds) and growth (loan pricing
pressure from banks) dynamics, we expect the share of term loans to increase (in
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the near term) and retail deposits to remain a key source of funding. In FY13, of the
incremental AUM mix, 80% came from retail housing v/s its share of 67% at end-
FY12. To protect overall spreads, there remains a possibility of marginal increase in
the share of high-spread corporate business. We draw comfort from efficient ALM
management of the company, which has been tested time and again.
Bulk of incremental funding from bonds & deposits in FY13
Source: MOSL, Company
Individual segment now forms 80% of incremental lending
Source: MOSL, Company
Increasing borrowings avenues; ECB & higher limit from insurance companies
As on 1QFY14 funding mix comprised of 59% bonds, FCCBs and CPs, 8% domestic
term loans and 33% deposits, which reflect diversity and granularity in its funding
profile. Historically, HDFC utilized various sources of funding based on liquidity, rate
and demand for instruments. In a tight liquidity and rising interest rate
environment, company preferred to borrow via retail deposits, and in case of easy
liquidity and falling rate scenario, it preferred the wholesale market (bank termloans and money markets). For example in FY13, of the incremental liabilities, 80%
came from retail deposits, while bonds replaced bank term loans as banks were
constrained by base rates.
HDFC replaced high cost bank borrowings with low cost bonds, retail deposits in FY13
Source: MOSL, Company
While the current environment is not remunerative to borrow funds via ECB
(recently allowed for HFCs) and access more money via FII participation in debt
markets, it provides a strong long term platform for HDFC. A relaxation for
insurance/domestic MF limit for HFCs borrowings can also be a big boost in terms
of diversification of liability in the long term.
Strong asset liability
management keeps
spreads stable
Diversified borrowingprofile helps manage
cost of funds
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Subsidiaries: Guzzlers turn enablers of capitalInternal accrual to take care of lending business growth requirement
Most of HDFCs subsidiaries have grown sizably and become self-sufficient in terms offunding their own growth. There is no requirement for further capital infusion in thelife insurance business as it is now profit making.
With improving profitability, subsidiaries have started returning capital and higherdividend. We expect the share to rise as subsidiaries will continue to grow faster than
standalone operations of HDFC.
Due to the healthy Tier I ratio of 10.5%+, RoE of 23-24% and growth rate 20-25%, HDFCBank is unlikely to raise capital over next 12-15 months. In the medium term, listing of
life insurance arm will present capital to HDFC, which in turn can be used to fund HDFC
Bank, if needed.
Equity dilution done only to fund subsidiaries; core RoEs to help fund own growth
Source: Company, MOSL
Share of dividend from subsidiaries increasing in overall profits (%)
Source: Company, MOSL
HDFC Bank: Best retail franchise in country; consistent improvement in RoE
HDFC Bank, known for its consistent performance across operating parameters, has
delivered steady returns over the years. In the past decade, banks loan book posted
a CAGR of 40%, while earnings (PAT) clocked a CAGR of 33%. During the same
period, it delivered superior return ratios, with average RoAs of ~1.5% and RoEs of
~18%.
1.19
1.19
1.19
1.19
1.19
1.20
1.22
2.44
2.47
2.49
2.50
2.53
2.84
2.84
2.87
2.93
2.95
3.10
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
54.7m warrants converted, issued for
capital infusion in HDFC Bank in FY09
1:1 Bonus Issue
QIP of 18m shares atINR1,730 per share for
capital infusion in HDFC
Bank
0.1 0.2 0.3 0.4 0.21.1 1.0
1.8
2.8
4.4
1.7 1.82.5 2.4
0.6
4.7
3.4
5.0
6.7
9.0
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
Dividend income (INRm) Share in overall profits (%)
Investment phase over as
most of the subsidiaries
have become self sufficient
and do not require
fresh capital
Subsidiaries have
improvement in profitability
and have started returning
capital and are paying
higher dividends
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Well-capitalized to grow for next 12-15 months
During the high growth period of past decade, the bank raised capital nearly every
two years to fund growth. However, over the past few years, we have noted a
structural shift in HDFC Banks profitability profile, which has been reflected in the
strong return ratios clocked by it. In FY13, the bank achieved RoAs of 1.8% and RoEs
of ~20%, against average RoAs and RoEs of ~1.5% and ~18% during FY05-12.
Importantly, the improvement in RoEs has been achieved despite high tier I ratio of
10.5%+ now. Historically, the bank achieved RoEs of close to 20% just before it
raised capital. Currently, the improvement in return ratios, given high capital
adequacy, would help grow its loan book at 20% CAGR without raising capital at
least over next 12-15 months. This augurs well for HDFC Ltd as it will not require
capital infusion for the bank in the near term and hence does not exert any capital
pressures on the former.
Structural shift seen in HDFC Banks profitability
1.4 1.4 1.4 1.41.5
1.61.7
1.8
2.0 2.0
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
F
Y14E
F
Y15E
RoA(%)
Source: MOSL, Company
RoEs improve despite higher capital adequacy
17.7
19.5
17.716.9
16.116.7
18.7
20.3
22.123.1
8.6 8.6 10.3 10.6 13.3 12.2 11.6 11.1 10.8 10.3
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14E
FY15E
Tier 1 (%) RoE (%)
Source: MOSL, Company
HDFC Life Insurance: A steady player, profitability improves
In the life insurance space, HDFC Life is the second largest private sector player and
among one of the most consistent in the industry. Despite various regulatory
headwinds impacting growth and profitability dynamics of all insurers, HDFC Life has
consistently outperformed peers. Due to consistent higher-than-industry growth,
HDFC Life has become the second largest private sector insurer with 6.7% (overall
market share) market share (as in March 2013), though a tad lower than market
leader ICICI Prudential Life which enjoys 7.2% market share.
Business turns profitable; may not require additional capital infusion
Unlike some peers in the past, HDFC Life has not sacrificed profitability for market
share. Among major life insurers, company enjoys the second highest persistency
ratio after Max New York Life. Also, HDFC Life maintained a tight control on costs,
which resulted in marked improvement in its profitability.
With improved profitability and moderation in growth, the life insurance subsidiary
recorded a maiden profit of INR2.7b in FY12, which improved to INR4.5b in FY13.
We believe, going forward, the life insurance business profitability should improve
further as the business gains larger size and company continues to make operations
HDFC Life has consistently
outperformed peers.
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leaner to achieve better profitability. While the insurance business should not need
further capital infusion, its listing could unlock value for existing shareholders.
Life insurance business turned profitable in FY12
-1.3 -1.3-2.4
-5.0-2.8
-1.0
2.7
4.5
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
HDFC Life insurance PAT(INR bn)
Source: MOSL, Company
HDFC general insurance; self-sufficient, no more capital infusion required
In the general insurance space, HDFC Ergo has been a relatively smaller player with a
market share of 4-5%. The profitability of general insurance business had got
impacted adversely due to higher claims incurred by the company. In FY10, HDFC
Ergos combined ratio increased sharply to 135%, compared with 115% for ICICI
Lombard and 104% of Bajaj general insurance. However, since then, company had a
tight leash on claims and operating expenses, thus taking the combined ratio to
119% in FY11, 105% during FY12 and 92.6% in FY13, which improved profitability.
HDFC Ergo reported a PAT of INR1.54b v/s a loss of INR397m a year ago.
HDFC asset management: no capital infusion needed
HDFC MF is the largest asset management company in the country, with assets
under management of INR1,021b as in March 2013 and a market share of 12.4%. As
in March 2013, HDFC MF had equity AUMs of INR375b, constituting 37% of total
AUMs. HDFC MF generates healthy RoEs and does not require any more capital
infusion.
HDFC MF: Profitability remains healthy
0.460.68
1.18 1.29
2.082.42
2.69
3.19
FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13
HDFC AMC PAT (INR bn)
Source: MOSL, Company
HDFC Ergo turned profitable in FY13
-0.26
-0.94
-0.36 -0.40
1.55
FY09
FY10
FY11
FY12
FY13
HDFC Ergo PAT (INR bn))
Source: MOSL, Company
Insurance businesses of
HDFC (both life & non-life)
have become profitable
and do not require
capital infusion
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Superior return ratios; attractive valuationsRetain as top pick with SOTP-based target price of INR889
Stable spreads across interest rate cycles, impeccable asset quality track record andsingle digit cost to income ratio shall ensure superior core lending business RoA of 2.4-2.5% and RoE of 26-27%.
Business growth will be driven by continued momentum in the individual home loansegment and traction in housing demand in Tier II/III cities. We model loans CAGR of
~19% during FY14E/15E.
At CMP of INR654, HDFC trades at an attractive valuation of 9.8x FY15E core lendingbusiness EPS. Our SOTP-based target price is arrived at from 4x P/core BV (16x lending
business EPS) to lending business and INR297/share for subsidiaries (including HDFC
Bank).
Superior execution and consistent performance
HDFCs execution, by withstanding competitive pressure without impacting core
parameters and profit growth, is commendable. Across different rate and growth
cycles, company has proved its superior execution skills by delivering consistent
performance (loan CAGR of 25% over FY00-13, core PBT (ex trading gains and
dividend income) CAGR of 30%, led by largely unaltered strategy and stability at the
top, compared to peers, and by translating business opportunity into stable and
profitable growth.
Historically, HDFC has grown its business at a healthy pace of 25% CAGR over FY00-
11, with spreads stable within a narrow band of 2.1-2.3% and superior asset quality
across business cycles. Return ratios remained strong, with core RoA of ~2.3%+ and
core lending RoEs of 25%+ over the years. We expect HDFCs core operations to
remain strong and model a loan CAGR of ~19% during FY13-15E. Spreads are likely
to remain stable at 2.2-2.3% over FY13-15E. Healthy business growth, stable
spreads, control over opex and robust asset quality should lead to healthy return
ratios, with RoAs of ~2.3%+ and core lending RoE of 26%+.
HDFC P/E Band
Source: MOSL, Company
HDFC P/B Band
Source: MOSL, Company
Consistence performance
across interest rate/ asset
quality cycles makesHDFC one of the most
resilient lender
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Buy for upside of 36%
SOTP FY15E Based (INR)Value
(INR b)
Value
(USD b)
Value/
Sh. (INR)% of total Rationale
Core business 917 13.5 593 66.74x FY15 Adjusted BV (for investments in subs and
HDFC Bank, Implied P/E of 16x Core EPS)
Key Ventures
HDFC Bank 410 6.0 265 29.8 Valued at INR755/share 3.5x FY15E BV
HDFC Standard Life (72.5% stake) 107 1.6 69 7.8 Appraisal Value; Economic Stake - 72.5%
HDFC AMC (60% stake) 30 0.4 19 2.2 4% FY15E AUM, 15x FY15E PAT
Property Funds 7 0.1 4 0.5 13.3% of total AUM USD1.1b
HDFC General Insurance (74% stake) 7 0.1 4 0.5 Last stake sale value + 20%
Gruh Finance 13 0.2 8 0.9 Valued at 3x FY15E BV
Total Value of Ventures 573 8.4 370 41.7
Less: 20% holding discount 115 1.7 74 8.3
Value of Key Ventures 458 6.7 296 33.3
Target Value Post 20% Holding Company
Discount1,375 20.2 889 100.0
CMP 1,011 14.9 654
Upside - % 36.0 36.0 36.0
Target Price w/o 20% Holding Company
Discount1,490 21.9 963
CMP 1,011 14.9 654
Upside - % 47 47 47
Source: Company, MOSL
DuPont Analysis (%)
2008 2009 2010 2011 2012 2013 2014E 2015E
Net Interest Income 3.67 3.45 3.28 3.50 3.40 3.40 3.44 3.49
Non Interest Income 0.40 0.40 0.66 0.65 0.64 0.59 0.54 0.53
Fees and Other Charges 0.08 0.12 0.21 0.17 0.17 0.13 0.13 0.13Treasury and Dividend
Income0.29 0.25 0.43 0.46 0.45 0.44 0.38 0.38
Other Income 0.03 0.02 0.02 0.02 0.01 0.02 0.02 0.02
Net Income 4.07 3.85 3.94 4.16 4.04 4.00 3.98 4.02
Operating Expenses 0.38 0.34 0.30 0.30 0.29 0.30 0.29 0.29
Cost to Income Ratio (%) 9.30 8.82 7.53 7.17 7.29 7.43 7.39 7.21
Employee Expenses 0.16 0.15 0.13 0.14 0.13 0.14 0.14 0.14
Other Expenses 0.22 0.19 0.16 0.16 0.16 0.16 0.16 0.15
Operating Profit 3.69 3.51 3.64 3.86 3.75 3.70 3.69 3.73
Provisions/write offs 0.04 0.05 0.05 0.05 0.05 0.08 0.09 0.10
Extra ordinary Income 0.85 0.00 0.00 0.00 0.00 0.00 0.00 0.00
PBT 4.50 3.46 3.59 3.80 3.69 3.62 3.60 3.63
Tax 1.25 1.01 1.00 1.04 1.01 0.95 0.97 1.02
Tax Rate 27.78 29.09 27.82 27.37 27.23 26.24 27.00 28.00
Reported PAT 3.25 2.45 2.59 2.76 2.69 2.67 2.63 2.62
Adjusted PAT 2.59 2.45 2.59 2.76 2.69 2.67 2.63 2.62
Leverage (x) 8.57 7.42 7.70 7.87 8.44 8.25 8.09 8.59
RoE 22.17 18.20 19.95 21.74 22.69 22.03 21.24 22.47
Core RoE 38.12 27.77 23.01 23.10 22.31 23.76 25.60 26.07
Source: MOSL
Stable margins
across cycles
Share of dividend
income rising
Strong control
over cost
Stable operating
profitability
Expect core lending
RoE of 25%+
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Financials and Valuation
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N O T E S
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