Accumulate HDFC Bank; target Rs 685: Dolat Capital
Dolat Capital is bullish on HDFC Bank and has recommended 'Accumulate' rating on the stock with a target price of Rs 685 in its October 15, 2013 research report.
October 16, 2013 / 18:39 IST
Dolat Capital's report on HDFC Bank
"HDFC Bank's overall results were in line with expectations; however the pressure on NIM at around 25bps QoQ was slightly high. The hike in the short term borrowing rates, post the RBI measures; and maintenance of higher CRR balances largely contributed to the pressure on NIM. The management continues to guide for NIM in the range of 4.1 percent to 4.5 percent, with quarterly swings of 10-15 bps in either direction. We believe that the hike in lending rates had arrested the slide in NIM in Q2 & going forward as the short term deposit rates starts to ease, NIM should tend to stabilize. At this point, we expect NIM to see only a moderate pressure for the next quarter.""Overall balance sheet growth was lower as loan growth slowed down to 16 percent YoY and deposit growth to 14 percent YoY. The bank's focus was to reduce the pressure on margins and refrained from taking lending exposures where the incremental spreads was low. Asset quality saw modest pressure resulting in an increase in gross NPLs by Rs 2.2bn to Rs 29.4bn (1.1 percent Gross NPL). The CV financing and construction equipment portfolio continues to see stress signs, at levels similar to in the past quarters. The corporate portfolio did not see any major stress this quarter. In our view, while the stress could remain at current levels, the bank's asset quality should remain amongst the best in industry with the one of the highest coverage ratios.""The bank did not amortize the MTM loss of Rs 1.15bn (post tax Rs 766 mn) on the bond portfolio, despite being allowed by the RBI. Had the same been done, the net profit growth would have been much higher at 32 percent YoY. The stock is currently trading at PBR of 3.6x on FY14 BVPS and 3.1x on FY15 BVPS. Despite the size, given the bank's agility to manage its balance sheet, we believe that NIM pressures and low balance sheet growth phase is only temporary. The bank should deliver amongst the most stable performance in the industry and command premium valuations. We maintain our Accumulate rating on the stock with target price of Rs 685 based on PBR of 3.8x on FY14 BVPS and 3.2x on FY15 BVPS forecasts," says Dolat Capital research report.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. 
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