Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sell
HDFC Bank (HDBK.BO)
Return Potential: (1%) Equity Research
Among the best, but valuations at a premium; downgrade to Sell
Source of opportunity
We downgrade HDFC Bank to Sell, given significant outperformance (+12%/
19.7% vs Sensex in past 3/12 months) and relatively better upside potential
elsewhere in our coverage (>15% in Buy-rated IndusInd Bank (on CL), Yes,
ICICI Bank). The stock is trading at 4X FY12E P/B (vs private banks at 2.5X), at
+1SD premium to its historical average. As is the case for the sector, we
expect HDFC Bank to see margin pressure as cost of deposits rise but lending
rates stabilize post Sept 2011. In terms of asset quality, we think the best is
behind us (net NPL at 0.2%, provisions to loans at 1%); although relative to
other banks, HDBK’s asset quality will likely remain superior, in our view.
Catalyst
We estimate margins to remain high vs industry, but declining to 4.24% in
FY12E and 4.18% in FY13E from 4.44% in FY11. In FY12E, this would likely
be driven by higher cost on repricing of deposits, while lending rates stop
rising; in FY13E, HDBK’s margins would likely come down as rates start
declining and the higher CASA ratio of 52.7% (FY11) would not see the
benefit of declining rates. While we expect PAT growth to remain healthy
at above 20%, it would come off historical highs of 30%+ (FY04-FY11),
unless HDFC Bank sees significant improvement in fees.
Valuation
We fine-tune our FY12E-FY14E EPS by -3% to 1% to factor in lower NII post
1QFY12. However, we raise our 12-m CAMELOT-based TP to Rs500 (from
Rs488) as we roll forward target BVPS by one quarter to June 2012,
implying marginal potential downside. HDFC Bank is currently trading at
4X FY12E P/B, at +1SD premium to its historical average.
Key risks
Key risk: Higher than expected margins and lower than expected cost of
operations.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Sell List
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sell
HDFC Bank (HDBK.BO)
Return Potential: (1%) Equity Research
Among the best, but valuations at a premium; downgrade to Sell
Source of opportunity
We downgrade HDFC Bank to Sell, given significant outperformance (+12%/
19.7% vs Sensex in past 3/12 months) and relatively better upside potential
elsewhere in our coverage (>15% in Buy-rated IndusInd Bank (on CL), Yes,
ICICI Bank). The stock is trading at 4X FY12E P/B (vs private banks at 2.5X), at
+1SD premium to its historical average. As is the case for the sector, we
expect HDFC Bank to see margin pressure as cost of deposits rise but lending
rates stabilize post Sept 2011. In terms of asset quality, we think the best is
behind us (net NPL at 0.2%, provisions to loans at 1%); although relative to
other banks, HDBK’s asset quality will likely remain superior, in our view.
Catalyst
We estimate margins to remain high vs industry, but declining to 4.24% in
FY12E and 4.18% in FY13E from 4.44% in FY11. In FY12E, this would likely
be driven by higher cost on repricing of deposits, while lending rates stop
rising; in FY13E, HDBK’s margins would likely come down as rates start
declining and the higher CASA ratio of 52.7% (FY11) would not see the
benefit of declining rates. While we expect PAT growth to remain healthy
at above 20%, it would come off historical highs of 30%+ (FY04-FY11),
unless HDFC Bank sees significant improvement in fees.
Valuation
We fine-tune our FY12E-FY14E EPS by -3% to 1% to factor in lower NII post
1QFY12. However, we raise our 12-m CAMELOT-based TP to Rs500 (from
Rs488) as we roll forward target BVPS by one quarter to June 2012,
implying marginal potential downside. HDFC Bank is currently trading at
4X FY12E P/B, at +1SD premium to its historical average.
Key risks
Key risk: Higher than expected margins and lower than expected cost of
operations.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Sell List
No comments:
Post a Comment