INSUBCONTINENT EXCLUSIVE:
Angel Broking has a buy call on Dewan Housing Finance Corporation with a target price of Rs 300.
The current market price of Dewan Housing
Finance Corporation is Rs 208.60.
Time period given by the brokerage is one year when Dewan Housing Finance Corporation price can reach the
Investment rationale by the brokerage:Dewan Housing Finance (DHFL) posted steady operating performance yet again in 2QFY18, however,
liquidity issues began at the end of the quarter
Further, in-line with the loan book, AUMs also increased by 38 per cent yoy in the quarter
other income and a reduction in cost with respect to income, which decreased by 80bps to 24.3 per cent.
Asset quality intact despite higher
per cent in home loans, LAP, corporate loan and SME loans respectively
The borrowings increased by 26 per cent yoy, while the calculated cost of funds increased by 26bps to 9.07 per cent
The mix in borrowing remained largely unchanged with banks accounting for 42 per cent of total borrowings, followed by capital markets (40
per cent) and others (18 per cent)
Current liquidity issue has led the company to recalibrate business strategy
Here on, management will focus more on retail lending and reduce project finance from current 17 per cent to 5 per cent in next 4 quarters
The rising cost of funds and stiff competition would restrict it to pass on cost and will lead to compression in spread
We expect AUM growth to moderate for next 2 quarters considering current liquidity tightness
We will continue to closely monitor developments on funding availability and performance of LAP/project finance book.
Outlook Valuation:
Current liquidity issue would completely reset midterm growth path and return ratios
We expect loan book to slowdown significantly over FY18-20, driven by rising cost of funds
Considering, the above parameters, we have moderated our loan growth expectations for the company from 30 per cent to 5 per cent for FY2019E
We maintain our BUY on the stock, with our target price of Rs 300.
