Emkay's research report on HDFC Bank
HDFCB reports +4% beat on NII (Rs55bn), in line PPOP and PAT (Rs40.6/23.8bn) for Q2FY15. Positives on all counts – NII growth, loan growth and asset quality. NIMs too play part as they expand 10bp qoq
Loan growth at 22% yoy (4.5% qoq) driven by 17/22% yoy growth in retail/wholesale loan. Incremental market share in TTM loans stands at 9.5% vs. current market share of 5.2%
Asset quality improves with flat GNPA qoq and 9% qoq decline in NNPAs. Provision cover improves to 72.7% vs.70% qoq
We upgrade our TP to 1,020, valuing stock at 17/3.6x FY16/17 average earnings and ABV, Upgrade to ACCUMULATE
"HDFCB’s Q2FY15 results have shown stronger traction in loan book growth and topline growth. The topline growth which had seen deceleration in last three quarters has seen decent bounce back and will also get support in H2FY15 from a favorable base in form of modest trading and Fx income growth in H2FY14. The bank has upped the ante on the loan growth and the incremental market share gain now stands at 9.5% for TTM. We believe that the unfavorable base effect in the fee income growth could also wane in coming couple of quarters. HDFC Bank commands valuation premium over its peers owing to its a) ability towards healthy loan growth and across all segment ie retail and corporate b) NIM at 4%+ levels c) stable asset quality with healthy PCR and d) adequate capital for growth with superior return ratios. We continue to retain the stock as one of our top bets in the banking space. We value the bank at 17x/3.6x average PERABV on FY16/17E basis. Upgrade the stock to ACCUMULATE with target price to Rs 1020", says Emkay Global Financial Services research report.
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