HDFC’s results have been less than ordinary this time around. VERY less than ordinary. Consolidated results are the worst we’ve seen in a while.
We saw a 8% increase in revenues, but only a 4.4% increase in profits before tax. And the EPS was flat!
In fact the EPS growth is the lowest in FIVE YEARS!
Now, we are at a point where the company is valued richly for all its growth and the subsidiaries etc. but consolidated financials just aren’t working out.
On a standalone basis, the home loan business is clocking just 6% growth on interest income and 4% profit before tax. This scales up to 18% increase in the PAT because of a massive dividend they got from HDFC bank, of Rs. 425 cr. (For last year, they got the dividend in the June quarter). so technically, without the dividend, their profit growth is in the low single digits.
In fact, if you removed that dividend, you would see consolidated profit go down to lower than last year. Saved by a dividend!
Net interest margin fell from last year’s 4.01% to 3.95%.
The share has seen a lot of drama. It’s gyrated between 1100 and 1400 in the last 10 months. It’s also hit a major trendline and reversed today:
Markets have behaved weirdly – stocks that had good results have been battered, and stocks with lousy results have gone up. HDFC hasn’t been hurt much, and could just find some solace in the central bank support spree we are seeing nowadays. But this is not good news, that a stock like HDFC, which has traditionally given us at least 10% profit growth, is seeing such low single digit profit growth, propped up by dividends.
Disclosure: We have positions in HDFC, which are technical and short term in nature, please assume a bias. This is not a recommendation to go long or to go short a stock; do not treat this as investment advice and please consult your investment advisors before trading stocks based on any information.
