Dewan Housing Finance Corporation Limited (DHFL) reported 28.5% growth in
PAT at Rs231.5cr for the quarter, better than our expectations. Strong growth in
loans, decline in cost of funds and resultant NIM improvement, together with cost
rationalization were the key factors that have supported the earnings growth. DHFL’s 1HFY17 performance has been in line with
expectations on all counts. Going ahead, we expect it to post a healthy AUM
CAGR of 21% over FY2015-18E, which is likely to translate in earnings CAGR of
23%, over the same period. The stock price has seen sharp run-up in the last two
quarters and despite of that is trading at a discount to other HFCs.
At the current level, the stock is valued at 1.5x FY2018E ABV. We have revised our
target price to Rs350 and maintain ACCMULATE on the stock.

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