Jul 17, 2012, 01.19 PM | Source: Moneycontrol.com
KRChoksey is bearish on HDFC Bank and has recommended reduce rating on the stock with a target of Rs 582 in its July 16, 2012 research report.
, KRChoksey |
“HDFC Bank delivered another strong operating performance with PAT of Rs1,417 crore growing 30.6% Y-o-Y and down 2.5% Q-o-Q, in line with our expectation. NII grew to 22.3% y/y & 2.8% q/q aided by strong loan growth 21.5% y-o-y and 10bps q-o-q NIM improvement. Fee income saw healthy momentum, up 23.9% y-o-y supported by relatively strong growth in retail fee income. Provisions were increased 63.4% q-o-q to Rs487 crore mainly due to higher counter cyclical provisions. Overall asset quality remained fairly steady as absolute gross NPAs & net NPAs increased only 4.3% q-o-q and 12.0% q-o-q respectively with provision coverage of 81.0% in the challenging macroeconomic environment. Loan book growth and deposit growth were 21.5% Y-o-Y and 22.0 Y-o-Y, continued to outpace the sector. CASA ratio dipped 240bps Q-o-Q to 46% primarily attributable to strong term deposit mobilization and sequential fall in current account deposits. Maintain REDUCE.”
“NII grew 22.3% y-o-y & 2.8% q-o-q led by loan growth 21.5% y-o-y and sequential improvement in NIMs. On sequential basis, negative impact of robust growth in wholesale loan on NIMs was partially offset by relatively strong growth in high yields retail products and Q-o-Q improvement in investment yield resulted into NIM expansion. The management expects net interest margin would in the range of 3.9- 4.3% in medium to long term. We expect NII to grow 18.9% over FY12-FY14e driven by 20% CAGR in loan book. Non- interest income witnessed healthy growth 36.6% y-o-y & 2.5% q-o-q to Rs 1529 crore against Rs 1,120 crore a year ago. Healthy fee income growth, strong forex income and higher trading gains supported non-interest income contributing 30.5% of operating income. Fee income grew 23.9% y-o-y driven by retail (85%) and wholesale segments (15%).”
“HDFC Bank delivered excellent core operating performance in a tough quarter. Strong core earnings growth, healthy fee income growth, margin improvement, healthy business growth, strong asset quality were key positives from the result. Strong growth in retail loan book (largely fixed rate loan book) in last few quarters coupled with beginning of rate easing cycle would augur well for NIMs and NII growth key catalyst going forward. We expect HDFC Bank to deliver 20.4% CAGR in net earnings over FY12- 14e, aided by NII growth, steady fee income growth. We have increased our FY13 & FY14 earnings estimate by 2.1% & & 2.4% respectively factoring better fee income growth and trading gains. At Rs 590 the stock is trading at 3.5x FY14e adjusted book and 18.9x FY14e earnings, expensive valuation multiples factoring most of the positives. We maintain our REDUCE rating on the stock with target price of Rs582,” says KRChoksey research report.
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