Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
HDFC Bank
Stability justifies valuation premium
Lowest risk on asset quality; high provisioning coverage
We believe HDFC Bank (HDFC) is in a relatively sweet spot as it has the lowest
exposure to the stressed sectors and it compares favourably to the rest of the
banking sector. HDFC has one of the highest provisioning coverage ratios of 83%
of gross NPLs, which does not include general and floating provisions that amount
to nearly 1% of its outstanding loans.
Low earnings risk and strong balance sheet
A high current and savings account (CASA) proportion and well-matched asset
liability should help sustain its NIMs. Retail asset quality continues to be benign
and we see few signs of stress, such as those on credit quality trends for the leading
retail finance companies. HDFC continues to be well capitalised and we forecast
23% loan growth over the next two years.
FY13E valuations provide upside
HDFC is trading at 16.9x FY13E earnings (3.2x FY13E book), which we think is
attractive as we assume a 28% EPS CAGR over FY12-13, an average ROE of
19%, and a tier 1 ratio of 11%. We believe it can trade at a higher-than-average
premium to the rest of the sector as it has low risk and high earnings visibility.
Valuation: upgrade from Neutral to Buy, raise price target to Rs560.00
We raise our price target from Rs545.00 to Rs560.00 and upgrade our rating to
Buy. We base our price target on the residual income method, assuming cost of
equity and terminal ROE of 12.75%. Our price target implies 20x FY13E earnings
and 3.8x FY13E book.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
HDFC Bank
Stability justifies valuation premium
Lowest risk on asset quality; high provisioning coverage
We believe HDFC Bank (HDFC) is in a relatively sweet spot as it has the lowest
exposure to the stressed sectors and it compares favourably to the rest of the
banking sector. HDFC has one of the highest provisioning coverage ratios of 83%
of gross NPLs, which does not include general and floating provisions that amount
to nearly 1% of its outstanding loans.
Low earnings risk and strong balance sheet
A high current and savings account (CASA) proportion and well-matched asset
liability should help sustain its NIMs. Retail asset quality continues to be benign
and we see few signs of stress, such as those on credit quality trends for the leading
retail finance companies. HDFC continues to be well capitalised and we forecast
23% loan growth over the next two years.
FY13E valuations provide upside
HDFC is trading at 16.9x FY13E earnings (3.2x FY13E book), which we think is
attractive as we assume a 28% EPS CAGR over FY12-13, an average ROE of
19%, and a tier 1 ratio of 11%. We believe it can trade at a higher-than-average
premium to the rest of the sector as it has low risk and high earnings visibility.
Valuation: upgrade from Neutral to Buy, raise price target to Rs560.00
We raise our price target from Rs545.00 to Rs560.00 and upgrade our rating to
Buy. We base our price target on the residual income method, assuming cost of
equity and terminal ROE of 12.75%. Our price target implies 20x FY13E earnings
and 3.8x FY13E book.
No comments:
Post a Comment