1QFY2018 Result Update | HFC
July 25, 2017
Dewan Housing Finance
BUY
CMP
`456
Performance Highlights
Target Price
`550
Particulars (` cr)
1QFY18 4QFY17
% chg (qoq) 1QFY17
% chg (yoy)
Investment Period
12 months
NII
566
536
5.7
457
23.9
Pre-prov. profit
464
459
1.0
348
33.3
Market Cap (` cr)
14,290
PAT
260
249
4.6
201
29.5
Beta
2.1
Source: Company, Angel Research
52 Week High / Low
479/214
DHFL came out with yet another quarter of good results. AUM growth of 23% and PAT
growth of 29.5% was in line with expectations. Stable credit cost and ability to hold on
Avg. Daily Volume
35,01,768
to strong NIM were the key highlights of the quarter.
Face Value (`)
10
Loan growth accelerated further and momentum is likely to remain strong; After a
BSE Sensex
32,246
strong 20% growth in AUM in FY17, the growth rate has further accelerated with
Nifty
9,966
22.7% growth during Q1FY18. We expect 23% AUM CAGR over next three years,
Reuters Code
DWNH.BO
backed by higher incremental demand from the Govt’s push for affordable housing.
DHFL is a major player, lending to the LIG/MIG segment and the environment
Bloomberg Code
DEWH.IN
remains conducive for it.
Individual home loans picked up during the quarter, while LAP & Project finance
Shareholding Pattern (%)
continued to aid to the growth momentum: The home loans segment which had seen
slowdown in Q4FY17 witnessed some momentum and grew by 12.2% YoY & 5.1% QoQ.
Promoters
39.2
The LAP and project finance segment continued see strong off take and grew by 27.1% and
MF / Banks / Indian Fls
6.9
83.8% YoY.The loan mix remained more or less stable with Home Loans/ LAP/ Project
FII / NRIs / OCBs
25.1
Finance constituting 66%/17%/15% of the AUM.
Indian Public / Others
28.8
Cost of funds witnessed further easing leading to stable NIM, despite competitive
pricing; DHFL has been able to maintain a stable NIM at 3.05%, due to further easing
of cost of funds, down 12 bps QoQ to 8.71%. This is for the fourth consecutive
Abs. (%)
3m
1yr
3yr
quarters that DHFL has reported NIM above 3%.The management remains fairly
comfortable that the NIM will be maintained going ahead.
Sensex
8.7
14.8
22.7
No Sign of stress on the book, despite strong growth; DHFL has maintained a stable
DHFL
9.4
102.7
153.3
asset quality despite aggressive growth in the LAP and Project finance. For the last six
quarters the GNPAs has remained in the range of 0.94% to 0.98% and for Q1FY18 it
stood at 0.97%. While some NBFCs have witnessed incrementally higher stress in the
LAP portfolio, the company remains optimistic about the quality of its LAP book.
Outlook and valuation: DHFL received `1,969 cr, via selling its 50% stake in its life
3-Year Daily Price Chart
insurance business, thus boosting its CAR by ~400 bps. With 18.7% CAR we believe
500
the HFC is well capitalized to grow its book by ~23% over next two years, leading to
450
30% growth in PAT. At the current levels the stock is valued at 1.5x FY2019E ABV. We
400
maintain BUY on the stock with a target price of `550.
350
300
Key financials (standalone)
250
200
Y/E March (` cr)
FY2016
FY2017
FY2018E
FY2019E
150
NII
1,481
1,859
2,279
2,927
100
% chg
17.8
25.5
22.6
28.4
50
Net profit
729
927
1,171
1,556
-
% chg
17.4
27.1
26.3
32.8
NIM (%)
2.4
2.3
2.4
2.7
EPS (`)
25.0
29.6
37.4
49.7
Source: Company, Angel Research
P/E (x)
18.2
15.4
12.2
9.2
P/ABV (x)
2.9
1.9
1.7
1.5
Siddharth Purohit
RoA (%)
1.3
1.3
1.3
1.5
022 - 3935 7800 Ext: 6872
RoE (%)
15.3
14.4
13.8
16.2
Source: Company, Angel Research; Note: CMP as of July 24, 2017 * The Reported PAT of DHFL
for FY17 was ` 2,896.5 cr, which includes
` 1,969 cr from stake sale in Insurance JV
Please refer to important disclosures at the end of this report
1
Dewan Housing Finance | 1QFY2018 Result Update
Exhibit 1: Quarterly Income Statement
` Cr
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
% YoY
% QoQ
Interest Income
1,633
1,764
1,846
1,916
1,932
2,123
2,316
2,283
2,353
21.8
3.1
Interest Expenses
1,234
1,357
1,420
1,479
1,475
1,631
1,800
1,747
1,787
21.1
2.3
NII
399
407
426
438
457
492
516
536
566
23.9
5.7
Other Income
20
48
39
50
27
45
51
95
55
103.7
-42.1
Total Income
419
455
465
488
484
537
567
631
621
28.3
-1.5
Operating Expenses
120
125
130
150
130
133
143
168
151
16.2
-10.1
Cost / Income %
28.6
27.5
28.0
30.8
26.9
24.8
25.2
26.6
24.3
Depreciation
6
7
7
5
6
7
7
3
6
6.7
87.1
PPP
293
323
328
333
348
397
417
459
464
33.3
1.0
Provisions
32
45
48
50
45
45
45
83
83
84.4
-
PBT
261
278
280
283
303
352
372
376
381
25.7
1.2
Tax
88
97
95
93
102
120
127
127
120
18.1
-5.4
Tax Rate %
34
35
34
33
34
34
34
34
32
Adj PAT
173
181
185
190
201
232
245
249
260
29.5
4.6
Extra Ordinary Gain
1,969
Reported PAT
173
181
185
190
201
232
245
2,218
260
29.5
-88.3
Source: Company, Angel Research
Loan growth accelerated further and momentum is likely to remain strong; After a
strong 20% growth in AUM in FY17, the growth rate has further accelerated with 22.7%
growth during Q1FY18. We expect 23% AUM CAGR over next three years, backed by
higher incremental demand from the Govt’s push for affordable housing. DHFL is a
major player, lending to the LIG/MIG segment and the environment remains conducive
for it. Nearly 2/3rd of DHFL’s customers qualify for the interest subsidy scheme by the
Pradhan Mantri Awas Yojna and this has already started showing positive impact on
the growth and the company remains optimistic on the incremental growth in the
quarters to come.
Individual home loans picked up during the quarter, while LAP & Project finance
continued to aid to the growth momentum: The home loans segment which had seen
slowdown in Q4FY17 witnessed some momentum and grew by 12.2% YoY & 5.1% QoQ. The
LAP and project finance segment continued see strong off take and grew by 27.1% and 83.8%
YoY.The loan mix remained more or less stable with Home Loans/ LAP/ Project Finance
constituting 66%/17%/15% of the AUM.
Exhibit 2: AUM growth remained strong (` cr)
Exhibit 3: Loan Mix
120%
1,00,000
88,236
90,000
83,560
78,296
100%
3%
3%
3%
3%
3%
75,223
80,000
72,012
10%
12%
13%
14%
15%
70,000
80%
16%
16%
16%
17%
17%
60,000
60%
50,000
40,000
40%
72%
70%
69%
30,000
66%
66%
20%
20,000
10,000
0%
-
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Home Loans
LAP
Project Finance
Others
Source: Company, Angel Research
Source: Company, Angel Research
July 25, 2017
2
Dewan Housing Finance | 1QFY2018 Result Update
Cost of funds witnessed further easing leading to stable NIM, despite competitive
pricing; DHFL has been able to maintain a stable NIM at 3.05%, due to further easing
of cost of funds, down 12 bps QoQ to 8.71%. This is for the fourth consecutive quarters
that DHFL has reported NIM above 3%.The management remains fairly comfortable
that the NIM will be maintained going ahead. With surplus liquidity in hand the
company has been able to get better pricing from banks for its borrowings and we
expect another 30-40 bps drop in the average cost of funds in FY18. However, we
believe the lower cost will be passed on to the borrowers as the competition in the
individual home loans has picked up in recent quarters and hence we don’t expect
material gain in the NIM going ahead.
Exhibit 4: Stable NIM backed by lower cost of funds
Exhibit 5: NII growth trend remains healthy (` cr)
(%)
600
566
536
516
3.20
492
3.07
500
457
3.10
3.05
3.04
3.05
400
3.00
2.91
2.90
300
2.80
200
2.70
100
2.60
2.50
-
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Source: Company, Angel Research
Source: Company, Angel Research
No Sign of stress on the book, despite strong growth; DHFL has maintained a stable
asset quality despite aggressive growth in the LAP and Project finance. For the last six
quarters the GNPAs has remained in the range of 0.94% to 0.98% and for Q1FY18 it
stood at 0.97%. The GNPAs in the LAP/ Project Finance/SME segment for the company
has been in the range of 1.5%-1.7%, while that of home loans has been about 0.5%-
0.6%, which we think is not a point of worry. While the some NBFCs have witnessed
incrementally higher stress in the LAP portfolio, the company remains optimistic about
the quality of its LAP book.
Exhibit 6: Asset quality fairly stable
Exhibit 7: Cost / Income is trending down further
1.00%
(%)
0.98%
0.98%
0.97%
28.0
0.96%
25.3
24.4
23.8
23.4
0.96%
23.1
0.94%
0.94%
24.0
0.94%
0.92%
20.0
0.90%
16.0
0.88%
0.86%
12.0
0.84%
8.0
0.82%
0.80%
4.0
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Q1FY17
Q2FY17
Q3FY17
Q4FY17
Q1FY18
Source: Company, Angel Research
Source: Company, Angel Research
July 25, 2017
3
Dewan Housing Finance | 1QFY2018 Result Update
Outlook and valuation
DHFL received `1969 cr, via selling its 50% stake in its life insurance business, thus
boosting its CAR by ~400 bps. With 18.7% CAR we believe the HFC is well capitalized
to grow its book by ~23% over next two years, leading to 30% growth in PAT. At the
current levels the stock is valued at 1.5x FY2019E ABV. We maintain BUY on the stock with
a target price of `550.
Company Background
Dewan Housing was established in 1984 by late Shri Rajesh Kumar Wadhawan.
DHFL is a dominant player in niche markets (tier II & III cities) with strong foothold
in the limited competition low and middle income (LMI) segment. After the
acquisition and merger of First Blue Home Finance, DHFL also now caters to the
middle and upper middle income group. The company operates in the mortgage
financing business where the growth and asset quality have remained healthy over
the past few years.
The company has emerged as a one-stop-shop for its customers’ financial needs,
extending beyond home loans. The company has a presence in the education
loans, and mutual funds segments through Avanse Education Loans, and DHFL
Pramerica Asset Managers Pvt Ltd, respectively.
It is India’s third largest private sector HFC with an AUM of `88,236 cr as on 30th
June,2017. The company has a well diversified loan book with housing loans
accounting for the largest share at ~65.5, followed by LAP (16.6%), project loans
(14.7%) and others (3.2%).
July 25, 2017
4
Dewan Housing Finance | 1QFY2018 Result Update
Exhibit 8: Income Statement ( Standalone)
Y/E March (` cr)
FY16
FY17
FY18E
FY19E
Net Interest Income
1,481
1,859
2,279
2,927
- YoY Growth (%)
17.8
25.5
22.6
28.4
Other Income
329
345
397
456
- YoY Growth (%)
24.0
4.7
15.0
15.0
Operating Income
1,810
2,204
2,676
3,383
- YoY Growth (%)
18.9
21.8
21.4
26.4
Operating Expenses
533
583
644
711
- YoY Growth (%)
12.4
9.5
10.4
10.5
Pre - Provision Profit
1,277
1,620
2,032
2,672
- YoY Growth (%)
21.9
26.9
25.4
31.5
Provision and Contingencies
175
218
284
350
- YoY Growth (%)
66.7
24.6
30.2
23.3
Profit Before Tax
1,102
1,402
1,748
2,322
- YoY Growth (%)
16.9
27.2
24.7
32.8
Provision for Taxation
373
475
577
766
- as a % of PBT
33.8
33.9
33.0
33.0
PAT
729
927
1,171
1,556
- YoY Growth (%)
17.4
27.1
26.3
32.8
Exception Item
-
1,969
-
-
Reported PAT
729
2,896
1,171
1,556
Source: Company, Angel Research
Exhibit 9: Balance Sheet ( Standalone)
Y/E March (` cr)
FY16
FY17
FY18E
FY19E
Share Capital
292
313
313
313
Reserve & Surplus
4,600
7,683
8,634
9,897
Net Worth
4,892
7,996
8,947
10,210
Borrowings
51,556
71,023
83,807
1,00,568
- Growth (%)
27.3
37.8
18.0
20.0
Other Liabilities & Provisions
11,405
13,280
6,385
9,122
Total Liabilities
67,853
92,298
99,139
1,19,901
Cash & Bank Balance
3,408
3,430
3,499
3,569
Investments
893
13,535
1,995
2,545
Advances
61,775
72,096
90,120
1,09,947
- Growth (%)
21.0
16.7
25.0
22.0
Fixed Assets
781
843
891
944
Other Assets
996
2,394
2,634
2,897
Total Assets
67,853
92,298
99,139
1,19,901
Source: Company, Angel Research
July 25, 2017
5
Dewan Housing Finance | 1QFY2018 Result Update
Exhibit 10: Key Ratios ( Standalone)
Y/E March
FY16
FY17
FY18E
FY19E
Profitability ratios (%)
NIMs ( on AUM )
2.4
2.3
2.4
2.7
Cost to Income ratio
29.4
26.5
24.1
21.0
Cost to Asset ratio
0.9
0.7
0.7
0.6
ROA
1.3
1.3
1.3
1.5
ROE
15.3
14.4
13.8
16.2
CAR %
16.7
19.3
17.0
15.0
Asset Quality
Gross NPAs (%)
0.9
0.9
1.0
1.0
Net NPAs (%)
0.6
0.6
0.6
0.6
Credit Cost (%)
0.3
0.3
0.4
0.4
Provision coverage(%)
38
38
37
40
Per Share Data (`)
EPS
25.0
29.6
37.4
49.7
BV
168
255
286
326
ABVPS
155
242
268
305
DPS
8.0
4.0
6.0
8.0
Valuation Ratios
PER (x)
18.2
15.4
12.2
9.2
P/BVPS (x)
2.7
1.8
1.6
1.4
P/ABVPS (x)
2.9
1.9
1.7
1.5
Dividend Yield
1.8
0.9
1.3
1.8
Dupont Analysis
Interest Income
11.4
10.6
10.4
10.9
Interest Expenses
9.0
8.3
8.0
8.2
NII
2.4
2.3
2.4
2.7
Other Income
0.5
0.4
0.4
0.4
Total Income
3.0
2.8
2.8
3.1
Operating Expenses
0.9
0.7
0.7
0.6
PPP
2.1
2.0
2.1
2.4
Provisions
0.3
0.3
0.3
0.3
PBT
1.8
1.8
1.8
2.1
Tax
0.6
0.6
0.6
0.7
ROA
1.2
1.2
1.2
1.4
Leverage
12.9
12.4
11.3
11.4
ROE
15.3
14.4
13.8
16.2
Source: Company, Angel Research
July 25, 2017
6
Dewan Housing Finance | 1QFY2018 Result Update
Research Team Tel: 022 - 39357800
DISCLAIMER
Angel Broking Private Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and Metropolitan Stock Exchange Limited. It is also registered as a Depository Participant with CDSL
and Portfolio Manager with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Private Limited is a
registered entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number
INH000000164. Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing
/dealing in securities Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public
offering of securities of the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any.
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Pvt. Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from
or in connection with the use of this information.
Disclosure of Interest Statement
Dewan Housing Finance
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
