India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank
Consistent growth in credit: The bank has had a very strong and
consistent credit growth in the past. It is a dominant player in retail
lending segment. Going forward, we expect it continue to grow above
the industry average. It will face pressure in the retail lending segment,
where its closest competitor, ICICI Bank, has resumed focus. It has a
very healthy CAR of 16.2% and Tier-I at 12.2%, which will enable it to
grow its balance sheet without any capital constraints.
NIMs to moderate: It has highest NIMs among industry peers. In fact,
its ability to maintain NIMs is one of the best in the industry,
considering it has highest CASA of 52.7%. However, we feel NIMs have
peaked and expect a decline by ~10 bps to 4.7% on account of rising
cost of deposits, mainly from increased cost on savings accounts. HDFC
Bank has 30.5% of its deposits in savings accounts.
Best asset quality among large banks: With gross NPA lowest after
Yes Bank in our coverage universe, its asset quality remains among the
best. Slippage decreased to 1.0% in FY11 as compared to 2.3% in
FY10. Exposure to restructured assets is limited to 0.4% of advances.
Such low levels of slippage for a business mix heavy on retail loan
segment are unsustainable. We have factored a slippage of 1.6% for
FY12-13E, in line with the management’s estimates. Credit cost will
increase sharply as there is limited scope for recovery.
Operating expenses to remain high: It has highest cost-to-income
ratio among large private banks, mainly due to higher proportion of
retail loans and branch expansion. Management expects opex to
continue to remain high as it will need to rapidly expand its branches in
order to sustain high growth momentum.
Valuation: At the CMP the stock is trading at 24.1x and 20.9x FY12E
and FY13E earnings, and at 4.1x and 3.6x P/ABV FY12E and FY13E
respectively, which we feel is reasonable considering its consistent
performance and its focus towards quality growth. We expect an ROA of
1.5% and ROE of 17.9% in FY13E. We initiate coverage with a HOLD
rating on the stock with the price target of Rs2,485 based on P/ABV of
3.5x FY13E
No comments:
Post a Comment