Hold HDFC Bank; target Rs 510: Emkay

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Hold HDFC Bank; target Rs 510: Emkay

Emkay Global Financial Services has maintained hold rating on HDFC Bank with a target price of Rs 510 in its January 19, 2012 research report.

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Emkay Global Financial Services has maintained hold rating on HDFC Bank with a target price of Rs 510 in its January 19, 2012 research report.

"HDFC Bank's Q3FY12 NII at Rs 31.1bn and profit at Rs 14.2bn - broadly inline. Strong traction in fee income and forex gains compensated for treasury losses. Key +ves: 21%+ yoy growth in loans and deposits, flat NIM, improvement in LDR and comfortable asset quality. C/Income remains largely stable despite significant branch addition. Increasing footprint in tier-III to tier-VI cities aided higher growth in retail loans. Deregulation of SB interest rates has had minimal impact with SA deposits at 30% of total deposits. Remain positive given superior operating matrix and stable asset quality. Valuations at 3.8/3.2x FY12E/FY13E ABV leave limited room for upside."

"HDFC Bank's Q3FY12 NII at Rs 31.1bn and net profit at Rs 14.3bn was inline with our estimates. The key highlights during the quarter were a) 21%+ yoy growth in loans and deposits, b) flat NIM at 4.1%, c) sequential improvement in LDR and d) comfortable asset quality and restructured loan portfolio. NII growth at 12% yoy (6% qoq) was aided by healthy loan growth, largely being in the nature of retail loans. Growth in fee income too remained healthy at 20% yoy. NIM at 4.1% remained stable qoq aided by sequential uptick in LDR and stable CASA ratio. With improvement in asset quality, bank passed lower provisioning through the profit and loss. Resultant, net profit at Rs 14.3bn was up 31% yoy and 19% qoq."

"HDFC Bank continues to operate with healthy capital. Q3FY12 CAR stood at 16.3% including Tier I CAR of 11.2%. We expect HDFC bank to report 23% CAGR in loan portfolio and balance sheet over FY11-13E. We drive comfort in the bank given a) superior operating matrix b) stable asset quality c) healthy capital and d) decent return ratios. However, current valuations at 3.8x FY12E and 3.2x FY13E ABV leave limited room for upside. Maintain HOLD rating with target price of Rs 510," says Emkay Global Financial Services research report.

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