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Richly valued
CHANGE
Initiate coverage at HOLD with a target price of INR696
HDFC has consistently delivered earnings and loan growth of 18-22% over
past many years. We estimate 18-20% loan growth in FY12 while reported
earnings growth will be lower due to a high base of FY11 (includes
strategic stake sale gains of INR3.0b-3.5b). However, we find valuations
rich and initiate with a HOLD rating.
CATALYST
Decline in wholesale rates and moderation in home prices
A decline in wholesale borrowing costs will be beneficial to HDFC’s
spreads. Moderation in home prices in top-tier metros like Mumbai and
suburbs could be a bonus for loan growth. Currently, Chennai and NCR,
are the top two contributors to the bank’s incremental loan growth.
VALUATION
Steady performer but valuations appear rich
HDFC has outperformed the market in the recent correction. The stock is
trading at 3.5x FY13E ABV (adjusted for INR236 per share for value of
subsidiaries based on current market price and INR52 per share for
investments in subsidiaries), which we believe leaves little room for
further upside, thus we initiate with a HOLD rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Richly valued
CHANGE
Initiate coverage at HOLD with a target price of INR696
HDFC has consistently delivered earnings and loan growth of 18-22% over
past many years. We estimate 18-20% loan growth in FY12 while reported
earnings growth will be lower due to a high base of FY11 (includes
strategic stake sale gains of INR3.0b-3.5b). However, we find valuations
rich and initiate with a HOLD rating.
CATALYST
Decline in wholesale rates and moderation in home prices
A decline in wholesale borrowing costs will be beneficial to HDFC’s
spreads. Moderation in home prices in top-tier metros like Mumbai and
suburbs could be a bonus for loan growth. Currently, Chennai and NCR,
are the top two contributors to the bank’s incremental loan growth.
VALUATION
Steady performer but valuations appear rich
HDFC has outperformed the market in the recent correction. The stock is
trading at 3.5x FY13E ABV (adjusted for INR236 per share for value of
subsidiaries based on current market price and INR52 per share for
investments in subsidiaries), which we believe leaves little room for
further upside, thus we initiate with a HOLD rating.
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