Accumulate HDFC Bk with target price of Rs 1250: Angel

Analysing HDFC Bank's Q1 earnings, Vaibhav Agrawal, VP-Research-Banking, Angel Broking says as expected it was a steady performance. The house has an accumulate rating on the stock with a target price of around Rs 1250, which implies an upside of 12-13 percent from current levels, says Agrawal. He does not expect much from the management commentary except a broader outlook in terms of growth and performance of loan book.As expected the country's second largest private sector lender, matched street expectations with the first quarter net profit rising 20.7 percent year-on-year to Rs 2,696 crore. The profit was supported by other income and operating profit but higher provisions restricted growth in profit.Below is the transcript of Vaibhav Agrawal’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: It seems like it is a very stable quarter though we are still waiting by for gross non performing assets (NPAs)?A: Net profit numbers at least bang in line with the expectations. Even on the net interest income (NII) it is slightly better than what we were building in about may be two percent which is better than what we were expecting. Even on the asset quality again first of all we are talking about very small numbers here and the few decimal points do not really matter. Over all it is steady set of numbers even on the asset quality so, overall a well rounded performance once again. Ekta: Provision figure has come in higher; it has come in at Rs 728 crore which compares to Rs 482 crore year-on-year (YoY) and which also compares to Rs 576.6 crore sequentially. Does that worry you? It is an over Rs 700 crore provision figure that HDFC Bank has reported but all the other parameters seem largely in line except for maybe even the absolute gross NPAs which have risen to over Rs 1,000 crore. A: The provision number is almost Rs 200 crore more than what we were expecting. However clearly the other items possibly on the other income as well as on the NII, has helped them sort of absorb this provisioning number. We will have to see whether there is any floating provision as well that they have made if entirely at the suitable to specific NPA. In the overall scheme of things by itself I don’t think this would be too much of a concern.Anuj: What is the call on the stock now, because it clearly is one of the most expensive stocks? At current price what is the call?A: In the recent times the valuation multiple has come down possibly also because foreign investors right now cannot invest because HDFC is classified as a foreign investor itself. We are giving a multiple of 3.75 times and at that level the target prices comes to around Rs 1,250. So we have an accumulate rating on the stock.Ekta: What is your sense in terms of commentary that you would like to hear from the management because last quarter we had that asset reconstruction? The one loan that was sold to the asset reconstruction companies (ARCs) last quarter, anything of that sort that you are expecting maybe that you would like to hear in terms of commentary or any mid quarter analysis that you have had on the same?A: We would be looking for the broader commentary from the management in terms of what sort of outlook they are seeing on the growth front as well as on their overall book how it is performing. Nothing specific, a broader outlook is what we are looking for. Ekta: Overall how would you rate the numbers this quarter?A: It is a pretty much inline quarter. Again a steady set of numbers and which is why we are maintaining the target price also around that Rs 1,250 level which implies around 12-13 percent upside from current levels.