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Housing Development Finance Corporation (HDFC) Bank is the second largest
private sector bank in India. The objective of the bank to build sound customer
franchise across distinct businesses so as to be the preferred provider of
banking services for target retail and whole customer segments, and to achieve
healthy growth in profitability consistent with bank risk appetite.
Healthy capital adequacy
The bank’s capital adequacy ratio (CAR) as at March 31, 2010 (computed as
per the Basel-ii guideline) stood at 17.4% as against 15.7% as of March 31,
2009. The Bank’s total capital adequacy ratio as at September 30, 2010
remained strong at 17% as against 15.7% as of September 30, 2009. On the
back of this strong CAR, we expect the bank increase it advances by 30% over
FY2011-12.
Wide-ranging product portfolio and cross selling
Apart from the traditional derivative and forex income, the bank earns
substantial fee income from transaction banking, cards and third party
distribution, among others. Overall, the bank’s core fee income increased by
16% on quarter ended September 30, 2009 and 5.7% on year ended March 31,
2010. It was one of the best in the sector and marked another significant
competitive advantage over its peers.
VALUATION
At the current price of Rs. 2109, the stock is trading at just 24.18x and
18.51x times of our estimated FY11E & FY12E earning. We thus
recommend a “BUY” with a target price of Rs. 2470.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Housing Development Finance Corporation (HDFC) Bank is the second largest
private sector bank in India. The objective of the bank to build sound customer
franchise across distinct businesses so as to be the preferred provider of
banking services for target retail and whole customer segments, and to achieve
healthy growth in profitability consistent with bank risk appetite.
Healthy capital adequacy
The bank’s capital adequacy ratio (CAR) as at March 31, 2010 (computed as
per the Basel-ii guideline) stood at 17.4% as against 15.7% as of March 31,
2009. The Bank’s total capital adequacy ratio as at September 30, 2010
remained strong at 17% as against 15.7% as of September 30, 2009. On the
back of this strong CAR, we expect the bank increase it advances by 30% over
FY2011-12.
Wide-ranging product portfolio and cross selling
Apart from the traditional derivative and forex income, the bank earns
substantial fee income from transaction banking, cards and third party
distribution, among others. Overall, the bank’s core fee income increased by
16% on quarter ended September 30, 2009 and 5.7% on year ended March 31,
2010. It was one of the best in the sector and marked another significant
competitive advantage over its peers.
VALUATION
At the current price of Rs. 2109, the stock is trading at just 24.18x and
18.51x times of our estimated FY11E & FY12E earning. We thus
recommend a “BUY” with a target price of Rs. 2470.
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