CLSA maintains 'Buy' rating on HDFC

RESEARCH: CLSA
RATING: BUY
CMP: RS 1589

CLSA maintains 'Buy' rating on HDFC with a price target of Rs 1,675. HDFC’s volume growth in FY10 is likely to be lower than the management guidance of 20% due to: a) a 20% fall in property prices, b) loss of market share and c) HDFC Bank retaining higher proportion of loans it originates.

However, margins are likely to surprise on the upside as the recent RBI guidelines on priority sector lending would lower funding costs for HDFC by 25-50 bps. HDFC’s FY10 loan growth would be ~15-17 %, lower than the management guidance of 20%, as even though the volumes in low and mid-housing segments have marginally improved, average property prices are down 15-20 %.
Source: ET