Apr 25, 2013, 03.39 PM | Source: Moneycontrol.com
Prabhudas Lilladher is bullish on HDFC Bank and has recommended accumulate rating on the stock with a target of Rs 725 in its April 23, 2013 research report.
, Prabhudas Lilladher |
“HDFC Bank reported a strong quarter on most metrics, except core fees, as ~20bps organic NIM improvement made up for slower-than-expected core fee growth. Asset quality continues to remain robust despite muted guidance on CVs. Though growth is likely to slow down, HDFCB has created significant buffers on Opex (1075 branches in FY11-13) and credit costs (floating provisions of Rs18bn) that can be used as levers for profit growth in FY14. However, valuations at 3.9x FY14 book is demanding to warrant a BUY. Hence, we continue to maintain ‘Accumulate’ with PT of Rs725/share).”
“Adjusted for reclassification, core NIMs improved ~20bps QoQ, higher than our expectations and this made up for the miss on core fees. With a large fixed rate book and falling rate cycle, we expect NIMs to remain stable for HDFCB v/s a moderating trend for the sector. Both Gross and Net NPAs were lower QoQ and even in CVs, management indicated that asset quality performance has been manageable v/s their muted guidance. Credit costs at ~50bps included ~Rs0.5bn of floating provisions. Credit costs is likely to inch up in FY14; however, large stock of floating provisions provides comfort on our ~80bps assumption for FY14. The only negative was a slowdown in core fees (down to 10 percent YoY growth from +20 percent in 9MFY13). With a slowdown in B/S growth and bottoming-out of credit costs, we expect large stock of floating provisions (Rs18bn) + opex buffer created (1075 branches over the last two years) to aid FY14 PAT growth,” says Prabhudas Lilladher research report.
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