Hold HDFC Bank, target of Rs 1530: KRChoksey

ALSO READ See previous views by KRChoksey See what other Experts & Brokerages are saying about HDFC Bank See messages about HDFC Bank HDFC Bank BSE | NSE 10/02/12 Are Mutual Funds betting on HDFC Bank?

KRChoksey has recommended a hold rating on HDFC Bank with a target price of Rs 1530 in its research report.

"HDFC Bank's Net profit met expectations as higher non interest income compensated for weaker operating performance. At current price of Rs 1390 the stock is trading at 2.75x FY11E P/BV. We maintain a hold on HDFC Bank with a target of Rs 1,530, giving an upside potential of 10% from the current levels, on account of: 1) superior asset quality compared to peers on account of risk averse lending practices and better underwriting standards during the cyclical upturn; 2) low proportion of restructured assets (.55%) to compared to private and public sector peers (3.5%); 3) higher coverage ratio, providing a buffer to future earnings; 3) high CASA ratio (45%) and better funding mix. which helps keep funding costs low and stable; 4) continued rundown of the erstwhile CBoP loan book, especially personal and auto loans, will further improve asset quality in FY10; 5) strong and growing liability franchise, which remains a channel for loan origination and low cost deposit mobilization."

"Key risks remain 1) slower than expected credit growth; and 2) overstretched valuations, Hold, target of Rs 1530," says KRChoksey's research report.

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