Want to become rich? This stock can be the answer you are looking for

Even though NBFC-major Housing Finance Development Corp (HDFC) posted a disappointing December 2018 (Q3FY19) quarter where the company's net profit more than halved, it is one stock that can make you rich moving forward. The reason why analysts are still optimistic about HDFC is due to its stable loan growth and asset quality. HDFC recorded a net profit of Rs 2,113.8 crore in Q3FY19, which was down by 60.11% compared to net profit of Rs 5,300 crore in the same period a year ago. The share price dropped on Tuesday, by almost 2% before ending at Rs 1918 per peice on BSE. 

Macquarie in its research note, highlighted various factors in HDFC post Q3FY18 result. They are:

Slowdown in loan growth driven by commercial book! 

Though individual AUM growth declined from 17% in 2QFY19 to 16% in 3QFY19, growth in the commercial book (real-estate lending book) was just 9% YoY in 3QFY19 down from 14% seen a quarter ago. The slowdown is mainly in the corporate book as demand from good quality corporates has been low (non-construction finance and non LRD book) and HDFC was averse to lend to riskier corporates. 

There also has been some slowdown in the core mortgage segment due to the GST issue which has reduced demand for under construction properties.

Minor blip in asset quality!

Gross stage 3 assets increased 12% QoQ to Rs56bn (or by 13bps QoQ to 1.44%) mainly on account of increase in corporate (non-individual loan book) NPLs by ~30bps QoQ to 2.46%. 

The increase in NPLs was due to a project Aristo which has been referred to NCLT by a creditor and default from ILFS employee trust loans which has stopped servicing interest.

#LIVE | देखिए बाजार का शुरुआती एक्शन #FirstTrade में @AnilSinghviZEE और बाजार के दिग्गजों के साथ। https://t.co/6ND6FDhEKW

— Zee Business (@ZeeBusiness) January 30, 2019

Have taken recourse to deposits to maintain margins!

Close to 70% of incremental funding has come from deposits which has helped HDFC Ltd to maintain both spreads and margins in a very tight liquidity environment coupled with lending rate hikes. 

While borrowings grew 2% QoQ, deposit growth was very strong at 11% QoQ.

Following which Macquarie reiterated that, "HDFC reported net profits of Rs21.1bn – 10% above our estimates mainly on account of lower-than-expected ECL provisions. Though loan growth slowed down a bit from 17% (AUM growth) YoY in 2QFY19 to 15% in 3QFY19, margins and asset quality were broadly stable which is encouraging. Maintain OP with a revised TP of Rs2,400."

Hence, even though HDFC sees a weak PAT in Q3FY19, the company is still well placed for giving hefty returns on stock exchanges ahead.