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Chola Securities
DHFL (Buy)
CMP: ₹615.55
Target: ₹743
Dewan Housing Finance Ltd’s AUM grew to ₹1.11 lakh crore in 4QFY18 (32.9 per cent y-o-y, 9.7 per cent q-o-q). Disbursements continued to grow sharply at 81.3 per cent y-o-y and 45.4 per cent q-o-q. Going forward, the management expects loan book to grow by 20-24 per cent a year, while disbursements would grow by 28-30 per cent a year till FY20E, predominantly driven by focus on affordable housing and SME segment.
In 4QFY18, the overall portfolio mix was noted at Home loans: 61 per cent; project poans: 15 per cent; LAP: 20 per cent; and SME: 4 per cent. The management expects the mix to change to, home loans 65-66 per cent; project loans 12-13 per cent; LAP & SME together to constitute 20-23 per cent; in the medium term.
Valuation: The stock is currently trading at P/ABV of 1.8X, P/E of 10.2X FY20E. Healthy growth in loan book, improving cost of funds on account of change in borrowing mix, improving cost efficiency and stable asset quality paints a positive picture for DHFL.
Risks: Stress in project loans; pressure on yields owing to competition; growth in sanctions not translating to growth in AUM.
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