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Recommend portfolio shift to AXSB
Recommend portfolio shift to AXSB
29% YoY growth in NII at Rs25.26bn - in line
Lower-than-anticipated provisioning drives 33% bottomline growth
YoY credit growth at 38% buoyed by wholesale loans; core growth at 32%
Efficiency parameters steadily inching up to pre-CBoP levels
Little headroom for further expansion in multiples; maintain ‘HOLD’
Correction offers investors portfolio realignment opportunity towards AXSB
HDFC Bank announced its Q2/H1FY11 results in line with our expectations. While the NII clocked in at Rs25.3bn (~30% YoY growth), net profit registered a 33% YoY growth at Rs9.12bn. On the balance sheet front, YoY growth in credit was just under 40%, predominantly driven by the wholesale book, evidently from exposure to larger telcos. Our numbers build in a 27% growth in lending this fiscal, predominantly led by short-term credit.
Valuation and recommendation: At its CMP of Rs2,366, the stock quotes at 4.1x our FY12E ABVPS of Rs577. We continue to see little headroom for a further re-rating in the multiples in the near-term. However, given the recent underperformance of other banks in the relevant peerset (AXSB IN), we advise investors to use the correction in AXSB to re-align their portfolio towards AXSB (CMP Rs1,466; TP Rs1,725).
While gross NPAs inched up in absolute terms on a sequential basis, net NPAs were lower from the Jun'10 levels, implying a rise in the provisioning coverage ratio. Hence, we read the lower-than-anticipated provisioning figure as either indicative of a lower depreciation booked on the investment book or a lower charge on the restructured portfolio.
Lower-than-anticipated provisioning drives 33% bottomline growth
YoY credit growth at 38% buoyed by wholesale loans; core growth at 32%
Efficiency parameters steadily inching up to pre-CBoP levels
Little headroom for further expansion in multiples; maintain ‘HOLD’
Correction offers investors portfolio realignment opportunity towards AXSB
HDFC Bank announced its Q2/H1FY11 results in line with our expectations. While the NII clocked in at Rs25.3bn (~30% YoY growth), net profit registered a 33% YoY growth at Rs9.12bn. On the balance sheet front, YoY growth in credit was just under 40%, predominantly driven by the wholesale book, evidently from exposure to larger telcos. Our numbers build in a 27% growth in lending this fiscal, predominantly led by short-term credit.
Valuation and recommendation: At its CMP of Rs2,366, the stock quotes at 4.1x our FY12E ABVPS of Rs577. We continue to see little headroom for a further re-rating in the multiples in the near-term. However, given the recent underperformance of other banks in the relevant peerset (AXSB IN), we advise investors to use the correction in AXSB to re-align their portfolio towards AXSB (CMP Rs1,466; TP Rs1,725).
While gross NPAs inched up in absolute terms on a sequential basis, net NPAs were lower from the Jun'10 levels, implying a rise in the provisioning coverage ratio. Hence, we read the lower-than-anticipated provisioning figure as either indicative of a lower depreciation booked on the investment book or a lower charge on the restructured portfolio.
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