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HDFC Bank
1Q Earnings: Delivers yet
again; Raise PO, Reiterate Buy
„1Q: Delivers yet again, net profit up 34% yoy
HDFC Bank reported earnings of Rs10.9bn, a 34% yoy, ~3% ahead of estimates
partly driven by operating leverage. Topline was up 19% yoy driven by 20% loan
growth and margins at 4.2% (flat yoy; in-line). Core fee grew ~16% yoy. As partly
expected, CASA, was down +350bps qoq (few one-off’s in 4Q), but still at ~49%.
Asset quality remains manageable
Slippages, in our estimate, are at ~Rs3-3.5bn in 1QFY12, but owing to few oneoffs (MFI and preference shares related investment NPLs); adjusted for which
slippages are flat qoq. Moreover, overall, asset quality continues to remain very
manageable, with gross NPLs at 1% and net at 0.2%, with coverage (specific) at
83% (including floating prov., at +125%). Furthermore, the bank is confident of
sustaining slippages at ~1.0% (1-yr lag loans) in FY12/13 (1.1% in FY11).
Earnings to grow at ~30% for FY12/13
We have tweaked our earning estimates by <1% to factor in lower treasury gains,
but we expect HDFC Bank to still deliver ~30% earnings growth in FY12/13, as
bank benefits from rising distribution, liability franchise and economies of scale.
Raise PO; Stock price to mirror earnings growth
Despite macro headwinds, the bank has continued to deliver +30% earnings
growth and manage asset quality. Hence, we believe the stock trading at ~4.1-
4.2x FY12E can continue to trade at similar multiples one-year forward (FY13).
Moreover, we believe the stock, trading at ~23x FY12E earnings (+18-19x FY13
earnings) can arguably continue to trade at least ~20-21x FY13E earnings, if
there is visibility of earnings growth sustaining at +30% and comfort on asset
quality. Hence, we raise our PO to Rs600, offering +18% upside potential.
Preferred pick.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank
1Q Earnings: Delivers yet
again; Raise PO, Reiterate Buy
„1Q: Delivers yet again, net profit up 34% yoy
HDFC Bank reported earnings of Rs10.9bn, a 34% yoy, ~3% ahead of estimates
partly driven by operating leverage. Topline was up 19% yoy driven by 20% loan
growth and margins at 4.2% (flat yoy; in-line). Core fee grew ~16% yoy. As partly
expected, CASA, was down +350bps qoq (few one-off’s in 4Q), but still at ~49%.
Asset quality remains manageable
Slippages, in our estimate, are at ~Rs3-3.5bn in 1QFY12, but owing to few oneoffs (MFI and preference shares related investment NPLs); adjusted for which
slippages are flat qoq. Moreover, overall, asset quality continues to remain very
manageable, with gross NPLs at 1% and net at 0.2%, with coverage (specific) at
83% (including floating prov., at +125%). Furthermore, the bank is confident of
sustaining slippages at ~1.0% (1-yr lag loans) in FY12/13 (1.1% in FY11).
Earnings to grow at ~30% for FY12/13
We have tweaked our earning estimates by <1% to factor in lower treasury gains,
but we expect HDFC Bank to still deliver ~30% earnings growth in FY12/13, as
bank benefits from rising distribution, liability franchise and economies of scale.
Raise PO; Stock price to mirror earnings growth
Despite macro headwinds, the bank has continued to deliver +30% earnings
growth and manage asset quality. Hence, we believe the stock trading at ~4.1-
4.2x FY12E can continue to trade at similar multiples one-year forward (FY13).
Moreover, we believe the stock, trading at ~23x FY12E earnings (+18-19x FY13
earnings) can arguably continue to trade at least ~20-21x FY13E earnings, if
there is visibility of earnings growth sustaining at +30% and comfort on asset
quality. Hence, we raise our PO to Rs600, offering +18% upside potential.
Preferred pick.
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