>HDFC(ICICI Direct)

Housing Development Finance Company (HDFC) is among the better diversified
plays on financial services in India given its leadership in the under-penetrated
mortgage market and strong growth in other financial services (life insurance,
asset management and banking via HDFC Bank). We believe that HDFC’s flexible
funding franchise, efficient operating performance and consistent earnings
momentum in a tough operating environment will be key stock catalysts. Potential
divestment in subsidiaries could be a long-term trigger. At the current market
price, the stock trades at FY10E P/BV of 2.3x (unadjusted) and 1.4x after adjusting
for investments in subsidiaries and associates. We initiate coverage on HDFC
with BUY and sum-of-the-parts (SOTP) price target of Rs1,940/share.

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