KR Choksey's research report on HDFC Bank
HDFC Bank delivered a 24% yoy growth in the loan book while deposits grew 17% yoy for Q4 FY19. The retail loan book grew 19% yoy while the CASA ratio fell by 112 bps over last year to 42.4% . C/D ratio stood at 88.8% in Q4 FY19 vs 91.6% in Q3 FY19. NII at INR 13089 Cr. is up 22.8% yoy/4.1% qoq. NIMs at 4.54% have expanded by 11 bps yoy/3 bps qoq in Q4 FY19 while Non-interest income grew 15% yoy ( almost flat on a sequential basis) Cost of Funds also improved for the bank on sequential basis by 20 bps while increasing by 28 bps on YoY basis. Asset quality improved with GNPAs reducing by 2bps sequentially to 1.36% while credit costs were mostly stable. PPOP at INR 10,844 Cr. is up 22.7% yoy/0.6% qoq on back of NIM expansion and control over operating expenses. Overall, Net Profit for Q4 FY19 grew by 23% YoY/5% qoq as the provisions came down by 15% qoq.
Outlook
HDFC Bank is currently trading at a P/B multiple of 3.8x/3.4x on FY20E/FY21E book value and we expect the premium valuation of the bank to continue on back of its high ROE, superior asset quality metrics and strong retail franchisee which supports high margin lending opportunities along with benefits of low funding costs. We apply a P/B multiple of 4.5x to the FY20 adj. BVPS of INR 601 to arrive at a target price of INR 2683 per share, an upside of 17% over the CMP. Accordingly, we reiterate our BUY rating.
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