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HDFC Bank Overweight
HDBK.BO, HDFCB IN
Strong 1Q12: Maintain Overweight but near term
upsides limited
HDFCB reported 1Q12 net profit of Rs10.9bn up ~34% y/y, 3% higher
than our estimates. Adjusted loan growth remained strong and credit costs
dipped further with robust asset quality momentum continuing. We retain
OW as earnings resilience remains high but ~25% outperformance over
last 6mnts could limit returns in the near term.
Strong loan growth: Loan growth adjusted for one-off 3G loans in
1Q11 was strong at ~29% y/y with both retail and corporate loan growth
being robust at ~28% y/y. Though some moderation is expected in the
auto loan book, given current loan growth trends, we see limited risks to
our 24% loan growth estimate.
NII misses estimates: NII was 2% lower than estimates in spite of the
large loan growth surprise. According to the management, large gap
between reported margins (down ~5bps q/q) and calculated margins
(down ~25bps q/q) was mainly due to quarter end balances and one-off
acquisition costs. Though margins did moderate, we think HDFCB will
be able to hold on to margins given high CASA and some reprising left
on retail assets.
Credit costs low, counter cyclical provisioning continues: Asset
quality continues to remain robust with gross delinquency trends
adjusted for MFI slippages lower than FY11 level leading to lower credit
costs at <50bps in 1Q12 from 75-80bps in 2H11. Management continues
to use the strong asset quality environment to enhance floating
provisions with Rs2.5bn provided in 1Q12 and this we believe, will
provide a significant cushion when the credit cycle turns.
Maintain Overweight, increase PT to Rs560/share: We increase our
PT to Rs560/share v/s Rs520/share earlier as we rollover our PT to Sep-
12 v/s Mar-12 earlier implying 4.1x Sep-12 book. Valuation premiums
have expanded over last 6mnts but we think the high CASA and
substantial provisioning buffer will keep earnings resilient making it an
attractive investment option in an uncertain environment, though near
term upside may be limited.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HDFC Bank Overweight
HDBK.BO, HDFCB IN
Strong 1Q12: Maintain Overweight but near term
upsides limited
HDFCB reported 1Q12 net profit of Rs10.9bn up ~34% y/y, 3% higher
than our estimates. Adjusted loan growth remained strong and credit costs
dipped further with robust asset quality momentum continuing. We retain
OW as earnings resilience remains high but ~25% outperformance over
last 6mnts could limit returns in the near term.
Strong loan growth: Loan growth adjusted for one-off 3G loans in
1Q11 was strong at ~29% y/y with both retail and corporate loan growth
being robust at ~28% y/y. Though some moderation is expected in the
auto loan book, given current loan growth trends, we see limited risks to
our 24% loan growth estimate.
NII misses estimates: NII was 2% lower than estimates in spite of the
large loan growth surprise. According to the management, large gap
between reported margins (down ~5bps q/q) and calculated margins
(down ~25bps q/q) was mainly due to quarter end balances and one-off
acquisition costs. Though margins did moderate, we think HDFCB will
be able to hold on to margins given high CASA and some reprising left
on retail assets.
Credit costs low, counter cyclical provisioning continues: Asset
quality continues to remain robust with gross delinquency trends
adjusted for MFI slippages lower than FY11 level leading to lower credit
costs at <50bps in 1Q12 from 75-80bps in 2H11. Management continues
to use the strong asset quality environment to enhance floating
provisions with Rs2.5bn provided in 1Q12 and this we believe, will
provide a significant cushion when the credit cycle turns.
Maintain Overweight, increase PT to Rs560/share: We increase our
PT to Rs560/share v/s Rs520/share earlier as we rollover our PT to Sep-
12 v/s Mar-12 earlier implying 4.1x Sep-12 book. Valuation premiums
have expanded over last 6mnts but we think the high CASA and
substantial provisioning buffer will keep earnings resilient making it an
attractive investment option in an uncertain environment, though near
term upside may be limited.
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