Accumulate HDFC Bank; target Rs 750: Prabhudas Lilladher
Brokerage house Prabhudas Lilladher is bullish on HDFC Bank and has recommended 'Accumulate' rating on the stock with a price target of Rs 750 in its research report dated July 17, 2013.
July 20, 2013 / 14:54 IST
Prabhudas Lilladher's report on HDFC Bank
"HDFC Bank (HDFCB) reported a mixed quarter with robust NIMs, loan growth and improving cost ratios offset by some inch-up in slippages and weak fees. Challenging macros seems to be having some impact on HDFCB’s financials but we see limited risks to overall profitabilty as we draw comfort from (1) Floating provisions (credit cost comfort) (2) Opex efficiency (offset growth pressure) and (3) Superior liability franchise (limited impact from RBI’s liquidity tightening). We continue to prefer HDFCB over HDFC Ltd/Kotak despite expensive valuations.""Stable operating metrics: (1) Loan growth at 21 percent YoY was on expected lines with some moderation in CV/CE/gold book. Overall auto loans would moderate in FY14 but we see limited risk to our 19 percent growth estimate (2) NIM performance at 4.6 percent was robust and with a large fixed rate book and no low reliance on bulk deposits and limited ALM mismatch, margins are expected to hold up (3) Opex growth at 16 percent YoY continues to remain less than B/S growth and with just 250-300 branches planned for FY14, management expects steady improvement to continue on cost ratios.""Gross NPAs inched up by ~17 percent QoQ with net slippages of >1 percent in the last 8-10 quarters. The inch up in slippages was more related to the granular slippages in the corporate book as retail slippage levels remained at Q4 levels in most retail segments with CV/CE continuing to face pressure and some inch-up in the gold portfolio. Liquidity pressure and FX volatility could impact HDFC’s working capital exposures as well but management seemed relatively comfortable currently.""Macro has turned difficult for financials but HDFCB provides comfort on multiple fronts despite valuations (1) Rs19bn of floating provisions provides significant credit cost comfort (2) Low bulk reliance and no ALM mismatch will lead to lower impact on HDFC’s margins (3) Certain slowdown in fee income will be offset by significant cost levers that HDFCB has built by expanding network by ~50 percent over FY11-13. HDFCB remains preferred defensive over HDFC Ltd/ Kotak. Accumulate HDFC Bank for target of Rs 750," says Prabhudas Lilladher 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. 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
