Dewan Housing Finance (DHFL) ended FY18 on a positive note. AUM gathered significant momentum—rose >30% (average 20% growth over the past two years)—on the back of robust >80% YoY disbursement growth in Q4FY18. This, along with stable NIMs at 3.03%, supported revenue growth and asset quality also remained stable (GNPLs at 96bps) with coverage of 110% (105% in FY17). However, better-than-expected revenue momentum was partially offset by elevated costs. Given presence in tier II/III cities, we expect DHFL to emerge key beneficiary of government’s Affordable Housing thrust.
At 2.0x FY20E P/ABV, the stock trades at significant discount to peers given RoE potential of 16% plus. Maintain ‘BUY’ with TP of INR726.
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