Axis Securities's research report on HDFC BankHDFC Bank (HDFCB) reported an in-line Q4FY16, with PAT of Rs 33.7bn (up 20% YoY) driven by robust 24% YoY growth in NII. Hallmark of earnings was 27% YoYgrowth in advances – significantly above industry’s growth rate (~11% YoY); the beat implies market share gain for HDFCB in both retail and corporate segments. NIM was resilient at 4.3% and asset qualitypristine. Our view: HDFCB’s business growth will continue, and the bank will gain market share further. Expect CAGR loan growth at 24% over FY16-18. Foresee headwinds to margins from MCLR regime and increased competition, though impact would be marginal. Management is confident of maintaining margins in the range of 4.0-4.4%. We expect RoA to increase to ~2% in medium term on the back of market share gains, fee income growth, and maturing investments in branch network. Focus on rural and digital initiatives would also bear meaningful dividends. HDFCB remains an enviable franchise and will continue to demand valuation premium. It is amongst our top picks in the sector.At CMP of Rs 1,092 the stock trades at 3.3x/2.8x FY17E/FY18E ABV of Rs330/Rs387. We roll forward our estimates to FY18, valuing HDFCB at 3.6x FY18 P/ABV to arrive at TP of Rs 1,400 (28% upside from CMP). For all recommendations, click here 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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