The Q4FY17 PAT was Rs 150 crore (47% y-o-y), 9% below our estimate. PPOP was 2% below estimate driven by lower NII, offset partially by lower costs. Provisioning was 44% higher as the company made contingent provisions of Rs 15 crore, thereby driving the PAT miss. Total disbursements were up 43% y-o-y. Loan assets (on book) were up 42% y-o-y. Housing loan book was up 38% y-o-y. Construction finance book was up 78% y-o-y. Non-housing loan book (LAP/LRD) was up 40% y-o-y.
NII per share was up 21% y-o-y. Reported loan spread for Q4FY17 was 2.37% vs 2.23% in Q4FY16; and for FY17 was 2.21% vs 2.18% in FY16. NIM for Q4FY17 was 3.38% vs 3.24% in Q4FY16. NIM for FY17 was 2.97% vs 3.10% in FY16. Fees and other charges were up 50% YoY. Total income was up 52% y-o-y. Operating costs were up 21% y-o-y. Cost /average AUM moderate to 0.91% vs 0.96% in Q3FY17 and 1.14% in Q4FY16. Provisioning/average AUM for the quarter was 69bp vs 43bp in Q4FY16; for FY17 it was 31bp vs 37bp in FY16.
We value the stock using a base case residual income model. We use a cost of equity of 12.8%, a beta of 1.10, a risk-free rate of 6.75%, and a market risk premium of 5.5%. We value the business over three phases — a five-year high-growth period, a 10-year maturity period, and a terminal period. We assume a terminal growth rate of 6%, similar to that for other financials in our coverage. Upside: Stronger-than-expected loan growth and operating leverage; much better-than-expected margins and credit costs.