Hold HDFC Bank; target of Rs 690: KRChoksey

KRChoksey has recommended hold rating on HDFC Bank with a target of Rs 690 in its 21 January, 2013 research report.

“HDFC Bank reported excellent set of numbers with PAT of Rs1,859 crore growing 30% Y-o-Y and 19.2% Q-o-Q, in line with our expectation. NII grew to 21.9% y/y & 1.8% q/q aided by strong loan growth 24.3% y-o-y. Fee income has continued to show strong growth momentum, up 24.3% y-o-y & 15.9% primarily attributable to strong retail fees in festival season and one off fees in wholesale segment. Trading gains were Rs136 crore vs. loss of Rs 106 crore, boosted non interest income. Provisions increased 4.9% q-o-q to Rs307 crore mainly due to marginal uptick in loan loss provision. Overall asset quality remained fairly stable as absolute gross NPAs increased 14% q-o-q; 80% coming from retail segment.”

“NII grew 21.9% y-o-y & 1.8% q-o-q led by loan growth 24.3% y-o-y. On sequential basis, Net interest margin declined 10bps mainly on account of higher growth in relatively low yield retail loans, decline in CASA ratio, lending rate discount in festival season and dividend income on mutual fund investments impact. We expect NII to grow 21.9% over FY12- FY14e driven by 22% CAGR in loan book. Non- interest income grew 26.7% y-o-y & 33.7% q-o-q to Rs 1799 crore against Rs 1,420 crore a year ago. Core fee income grew 24.3% y-o-y & 15.9% q-o-q on the back of higher volumes in retail fee generating products in festival season and one off wholesale banking. Forex income increased 9.4% q-o-q in on higher customer flows during the quarter. Trading gains were Rs136 crore vs. 106crore loss in Q2FY13.”

“HDFC Bank delivered another consistent core operating performance in a tough quarter. Strong growth in retail loan book (largely fixed rate loan book) in last few quarters coupled with rate easing cycle would augur well for NIMs and NII growth – key earning catalyst going forward. We expect HDFC Bank to deliver 28.4% CAGR in net earnings over FY12-14e. We have increased our FY13 & FY14 earnings estimate by 1.4% & 5.5% respectively factoring better NIMs and improvement in cost to income ratio. At Rs 659 the stock is trading at 3.8x FY14e adjusted book and 18.2x FY14e earnings, fairly valued in our view. We maintain our hold rating on the stock with target price of Rs690,” says KRChoksey research report.

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More