HDFCBANK
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Broker Reports
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HDFC Bank is one of India’s leading private banks & offers a diverse range of financial products and banking services to customers through a growing branch and ATM network and digital channels such as Netbanking, Phonebanking and MobileBanking. HDFC Bank offers a wide gamut of commercial and transactional banking services to businesses and organizations of all sizes. Due to huge fall in markets , we are revising our price target given in result review report (dated 21st Jan 2020) & assigning presently at Rs 1120 for long term.
BUY
We are initiating coverage on HDFC bank (HDFCB) with a Buy rating and Price Target of Rs 1,233 (SOTP basis) which implies an upside of 26% from the current levels. Our key reasons being 1) Amongst the best liability franchise/asset book which will help in consistent market share gains. 2) Proactive provisioning provides cushion for the COVID19 related stress. Asset quality looks manageable with risks in the unsecured, MSME and corporate books reined in. 3) Investments in digital strategy resulting in consistent cost rationalisation. Considering its stable margins, healthy asset quality, consistent performance and superior management, it is well placed to outperform its peers.
BUY
HDFCB's business growth remains robust despite economic activity getting impacted due to the COVID-19 outbreak. Corporate loan growth remains strong and is driving overall loan growth while retail loan growth remains soft. Although the RBI moratorium supports asset quality, credit cost is expected to stay elevated while provisioning buffers should limit the overall impact on earnings. A strong liability franchise would support margins while higher liquidity levels would enable the bank to ride the current crisis and gain further market share. We, thus, estimate loan book/PAT to deliver CAGR of 16%/17% over FY20-22E. Management succession remains a big event to watch for. Maintain Buy with PT of INR1,200 (3.0x Sep’21E ABV).
BUY
We have revised our NII estimates by -1.6%/-0.6%, PPOP estimates by -2.1%/- 0.8% and PAT estimates by -9.7%/-1.4% for FY21/FY22, respectively. We have retained Buy rating on HBL and revised our target price to Rs1,260 (from Rs1,282 earlier), valuing the stock at 3x FY22E P/BV.
BUY
The bank has shortlisted two internal and one external candidates. However, till its leadership is finalised, overhang on the stock would remain despite strong earnings and outlook. The bank continues to remain a portfolio stock and maintains premium valuations. Accordingly, we maintain BUY and maintain target price at Rs 1100 valuing the bank at ~ 15x FY22E EPS (2.74x FY22E ABV). We include Rs 75 per share for HDB Financial Services.
BUY
HDFCB reported a strong PAT of Rs69.3bn amidst COVID-19 lockdown uncertainty, which also prompted it to make Rs15.5bn (50bps of loans) as provisions on back of stress testing of loan book to vulnerabilities. Operating performance was better with PPOP growth of 20% YoY despite losing momentum on income streams in Feb’20 & Mar’20 months. Although, early part of FY21 continues be uncertain on business & asset quality but high contingency provisions of Rs45.0bn should cushion shocks from any nasty surprises. We build-in slippage rate of 2.15% v/s 1.9%-2.0% in last two years and higher credit cost of 130bps (excl contingency provisions) v/s 80-100bps despite which operating performance & return ratios will continue to be robust. We retain BUY with revised TP of Rs1,105 (from Rs1,124) based on 2.9x Mar-22 ABV on slightly tweaking loan growth & credit cost parameters
BUY
Despite higher slippages and elevated provisions on corporate slippages (a large part likely written off), overall earnings momentum was unaffected (2.2% RoA in 3QFY20) given the bank’s strong PPoP (3.9% of assets for 9MFY20), high contingent and floating provisions, and lower concentration risk in corporate book. However, management change (successor to Mr Puri likely be shortlisted by July/Aug) could prove to be a near-term overhang. At CMP, the stock trades at Dec-21E multiple of 3.3x. We maintain our BUY recommendation on the stock with an SOTP-based Target Price of Rs1,500 based on 3.7x Dec-21E P/ABV for standalone entity and the value of its subsidiaries, implying 3.8x of Dec-21E P/ABV.
HOLD
Credit growth beat the industry growth rate driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method, valuing standalone banking business at 3.7x of FY2021 ABV and its two subsidiaries at Rs 78/share. We recommend a Hold on the stock, with a target price of Rs 1,390/ share.
ACCUMULATE
We have revised our NII estimates by 0.0%/0.7%/1.1%, PPOP estimates by 1.3%/0.6%/1.0% and PAT estimates by -3.6%/1.8%/0.8% for FY20/FY21/FY22, respectively. We have retained Accumulate rating on HBL and revised our target price to Rs1,358 (from Rs1,322 earlier), valuing the stock at 3.3 H1FY22E P/BV. (See page 2 for incremental commentary).
BUY
Despite soft Q3FY20, we expect the bank to clock >25% earnings CAGR over FY19–21E and sustain superior return ratios (RoA of 2% plus) led by: i) best-in-class franchise; ii) productivity improvement; and iii) marginal stress baggage. We maintain ‘BUY/SO’.
BUY
HDFCB's operating performance remains strong in a tough environment. While corporate loan growth is strong and driving overall loan growth, retail loan growth remains skewed in favor of unsecured products. Asset quality has deteriorated as the bank reported higher slippages from lumpy accounts and the agri segment. However, provisioning buffers should enable a steady earnings trajectory. We estimate loan book/PAT CAGR at 19%/25% over FY19-22, led by continued improvement in operating leverage, higher fee income and stable margins. Change in the CEO (as Mr. Puri’s tenor comes to an end in Oct’20) will be a big event. Maintain Buy with a PT of INR1,500 (3.7x Sep’21E ABV).
BUY
Due to its focus, the bank has been able to maintain its leadership in retail loans with a slew of festive treats offer. Further, they have also stepped up corporate loans to offset the slowdown in the auto sector. The selection of the new MD continues to remain an overhang on the stock. The bank continues to remains a portfolio stock and maintains premium valuations. Accordingly, we maintain our BUY recommendation with a revised target price of Rs 1550 (earlier | 1440) valuing the bank at ~20x FY22E EPS (3.7x FY22E ABV) and include Rs 75 per share for HDB Financial Services.
BUY
HDFCB reported strong PAT of Rs74.2bn (in-line with PLe: Rs73.8bn) on back of strong other income (led by fees/treasury/recovery) and full benefit of tax rate, although bank has been using the benefit for higher contingency provisions (Rs7.0bn addl) for agri slippages and this quarter for fully provide for couple of corporate account slippages. This has also led to slight deterioration in asset quality. Important highlight of quarter was slowing NII growth rate which came at 13% YoY mainly on excessive liquidity carried on b/s and slower growth in high yielding loan segments. We expect this phenomenon should continue for another quarter and thereafter see better prospects as macroeconomics improve especially in semi-urban & rural areas, while bank benefitting from strong positioning maintained on liabilities. We retain BUY with TP of Rs1,406 (unchanged) based on 3.7x Sep- 21 ABV.
HOLD
Healthy advances growth, stable asset quality has helped bank deliver good set of numbers in the current quarter. With capital well above the regulatory requirements & higher retail focus, we expect bank to deliver strong credit growth going forward. Moreover, higher focus on productivity & digitization along with cost rationalization would likely result in better profitability growth. Hence, considering the sound fundamentals & strong growth prospects, we remain positive on the stock & recommend‘Hold’ with a revised price target of Rs.1,373 with investment horizon of 18-24 months.
ACCUMULATE
We have retained our NII and PPOP estimates and revised our PAT estimates by - 0.8%/-0.8% for FY21/FY22, respectively. We have retained Accumulate rating on HBL and revised our target price to Rs1,334 (from Rs1,335 earlier), valuing the stock at 3.0 H1FY22E P/BV.
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BUY
Credit growth beat the industry growth rate driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method, valuing standalone banking business at 3.7x of FY2021 ABV and its two subsidiaries at `78/share. We recommend a Buy on the stock, with a target price of Rs1,390/ share.
BUY
HDFC Bank currently trades at 3.5x its FY2021E BVPS, which we believe is attractive for a bank with its strengths and consistency. HDFC Bank continues to be at a strong position, performing consistently, buoyed by itsability to grow profitability (but at own pace) and strong underwriting and risk-measurement standards with pricing strength. We maintain our Buy rating on the stock with a unchanged PT of Rs. 1,510.
BUY
Given the general economic slowdown, near term pressure is evident. However, considering the focus on balance sheet growth maintaining superior asset quality, the bank is well poised to deliver consistently with margin leadership & robust return ratios. The bank remains a portfolio stock with premium valuations. Accordingly, we maintain our BUY rating with a revised target price of Rs 1440 valuing bank at ~24x FY21E EPS (3.9x FY21E ABV) and include Rs 75 per share for HDB Financial Services.
BUY
The bank’s strong network helped in sustaining growth in advances and deposits. The growth in deposits was supported by focus on granular accounts while advances grew despite weak growth in automobile sector. We value the stock at 3.9x FY21E BVPS with an increased target price of Rs. 1,412 and reiterate our BUY recommendation.
BUY
We believe HDFCB is well-positioned to deliver a healthy growth even in the current weak environment. Looking ahead, we expect the Bank’s strong capital position, improving operating efficiency and impeccable performance on asset quality front across cycles should continue to aid return ratios (RoA/RoE seen at 2%/17% for FY21E). At CMP, the stock trades at FY21E multiple of 3.5x. Marginally tweaking our earnings estimates for FY20E/21E, we maintain our BUY recommendation on the stock with an SOTP-based Target Price of Rs1,430 (based on 3.9x FY21E adjusted PBV and the value of its subsidiaries, implying 4.1x of FY21 P/ABV).
BUY
HDFCB saw strong earnings performance at Rs63.5bn (PLe: Rs60.1bn) on back of lower tax rate & steady operating performance. Although, NII growth was slower at 15% YoY on back of solid growth in term liabilities but was offset by both strong fees & treasury gains. Asset quality was quite stable with slippages & w.off down sequentially and commentary on delinquencies in portfolios was steady. On prudent basis, bank used the lower tax rate to make another Rs6.6bn of contingency provisions and passing Rs4.5bn of net effect (post DTA) to earnings. Continued penetration provides strong access to sticky customer base and with steady asset quality trends, NIMs of 4.2- 4.3% and ROEs of 18-19%, HDFCB continues to remain on strong path. Retain BUY with TP of Rs1,406 (unchanged) based on 3.7x Sep-21 ABV.
BUY
HDFC Bank currently trades at 3.3x its FY2021E BVPS, which we believe is attractive for a bank with its strengths and consistency. We believe the cut in corporate tax rate would likely benefit HDFC Bank in terms of increased net profit. Accordingly, we have re-worked our estimates and expect EPS benefit in low teens for HDFC Bank in our revised FY2020E/FY2021E profit estimates. We maintain our Buy ratingon the stock with a revised PT of Rs. 1,510.
BUY
Best placed despite challenging environment
Analysis of HDFCB’s 20F filings show (i) Quality retail franchise built-up in both liabilities and assets (ii) Early stress levels & delinquencies have risen in retail with increased credit costs & write-offs and (iii) bank remarkably maintains its track record of low concentration to single group Top 10 accounts. We slightly increase our credit cost estimates and lower other income for FY20/FY21. We reduce our target multiple to 3.7x from 3.95x given the uncertain environment and roll forward of our target to Sep-21 ABV. Retain BUY with revised TP of Rs2,732 (from Rs2700).
Analysis of HDFCB’s 20F filings show (i) Quality retail franchise built-up in both liabilities and assets (ii) Early stress levels & delinquencies have risen in retail with increased credit costs & write-offs and (iii) bank remarkably maintains its track record of low concentration to single group Top 10 accounts. We slightly increase our credit cost estimates and lower other income for FY20/FY21. We reduce our target multiple to 3.7x from 3.95x given the uncertain environment and roll forward of our target to Sep-21 ABV. Retain BUY with revised TP of Rs2,732 (from Rs2700).
BUY
Outlook & Valuation: We believe the bank is well positioned to deliver healthy growth even in the current weak environment. Its strong capital position, improving operating efficiency and impeccable asset quality performance across cycles should continue to aid return ratios with RoA/RoE pegged at 1.9%/16% for FY21E. At CMP, the stock trades at multiple of 3.4x FY21E. Marginally tweaking our earnings estimates for FY20E/FY21E, we maintain our BUY recommendation on the stock with an SOTP-based Target Price of Rs2,650 (based on 3.7x FY21E adjusted PBV and the value of its subsidiaries, implying a FY21 P/ABV of 3.8x).
BUY
Outlook & Valuation: Credit growth beat the industry growth rate driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method, valuing standalone banking business at 3.5x of FY21 ABV and its two subsidiaries at 147/share. We recommend a Buy on the stock, with a target price of 2,620/ share.
BUY
HDFC Bank shares are currently trading at a P/B multiple of 3.8x/3.4x on adj: FY20E/FY21E book value and we expect the premium valuation of the bank to continue on back of its high ROE, industry leading asset quality metrics and expanding retail franchisee which supports high margin lending opportunities along with benefits of low funding costs. We apply a P/B multiple of ~4.52x to the FY20 adj. BVPS of INR 593 to arrive at a target price of INR 2,683 per share, an upside of 16.8% over the CMP. Accordingly, we reiterate our “Buy” rating.
BUY
HDFCB'soperatingperformanceremainsstrong,although business growth has shown moderation, reflecting weakness in the consumption-linked lending segments and cautious stance on unsecured loans. We lower our growth estimates marginally - expect the bank to deliver 19%/20% loan book/PAT CAGR over FY19-21, led by stable margins and a continued improvement in operating leverage. Maintain Buy with a target price of INR2,750 (3.8x FY21E ABV for the bank).
BUY
HDFC Bank currently trades at 3.3x its FY2021E BVPS, which we believe is attractive for a bank with its strengths and consistency. While a cautious stance with rise in forward provision resulted in marginal impact for Q1, we believe management’s decision to be pragmatic is positive considering present times. HDFC Bank’s prudential provisioning will help facilitate a steady earnings growth trajectory, which will be positive. We maintain our Buy rating on the stock with an unchanged PT of Rs. 2,750.
HOLD
The current performance shows a mild moderation in business growth and asset quality. Going ahead, a cautious rise in forward provision provides marginal discomfort. The expected leadership change may remain an overhang on the stock keeping valuation subdued. We marginally cut our estimates to ~19% CAGR in NII, ~20% in PAT in FY19-21E. Accordingly, we downgrade our rating from BUY to HOLD with a target price of Rs 2400 (earlier Rs 2700) valuing bank at ~20x FY21E EPS (~3.2x FY21E ABV) and include Rs 150 per share for HDB Financial Services.
BUY
Despite softening growth we expect the bank to clock >23% earnings CAGR over FY19–21E and sustain superior return ratios (RoA of 2%) led by: i) best-in-class liability franchise; ii) productivity improvement from digital focus; and iii) marginal stress baggage. We maintain ‘BUY/SO’.Maintain ‘BUY’ with INR2,785 TP.
ACCUMULATE
We have revised our NII estimates by -1.1%/-1.6%, revised our PPOP estimates by -1.3%/-1.9% and PAT estimates by -1.5%/-1.9% for FY20/FY21, respectively. We have retained Accumulate rating on HBL and revised our target price to Rs2,576 (from Rs2,719 earlier), valuing the stock at 3.0 FY21E P/BV.
BUY
Business growth was slower both from retail & wholesale with some segments slowed cautiously, while some on back of slowing economy. Bank continues to deliver on most of its core operating metrics with well managed portfolio mix. With 20% CAGR earnings, 20% constant dividend payout (250% of FV special dividend announced as well) and 17% ROEs remains torch bearer for the industry and hence HDFCB remains our most preferred pick in banking universe. Retain BUY with TP of Rs2,700 (unchanged) based on 3.9x Mar-21 ABV.
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HDFCB has been consistently gaining market share across retail product segments. The bank’s strong capitalization and liquidity levels are likely to help it sustain this growth momentum. We expect HDFCBK to deliver 22%/22% loan book/PAT CAGR over FY19-21. Margins are likely to remain stable, while strong control on operating leverage is likely to result in steady return ratios (RoA/RoE of 1.9%/17.2% in FY21E). We maintain our Buy rating with a target price of INR2,780 (3.8x FY21E ABV).
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At a CMP of 2,290, the stock is trading at FY21E adjusted P/BV of 3.3x. HDFC Bank use to trade at 3.7x of its last two years forward Adj. P/BV, we have assigned similar earning multiple (and valued subsidiaries separately) looking at its consistent financial performance over the years, strong risk management capabilities and gaining market share in almost all the products. The lower cost and faster speed remain the USP for HDFC Bank. HDFC Bank to deliver loans CAGR of 20% and PAT at CAGR of 24% FY19-FY21E. We strongly recommend to buy HDFC Bank for a fair value of 2,635 a piece, seeking an upside of 15.1%.
BUY
Assets quality during the quarter also improved with gross slippage at Rs35.8 bn (slippage rate of 0.46% in Q4FY19 v/s 0.53% in Q3FY19). Subsequently GNPA and NNPA reported at 1.36% and 0.39% with PCR improving to 71.4%. The bank also made additional contingent provisions against stressed agri book which as per mgmt now looks comfortable in terms of outlook. With adequate capital adequacy ratio (17.1% in Q4FY19), resilient assets quality and strong liability franchise, HDFCB will continue its strong business growth and profitability trend in coming fiscals. We maintain our ‘Buy’ rating on stock with the potential price of Rs2,560 per share.
BUY
The Bank’s strong lending and deposit franchise, healthy capital position and impeccable asset quality performance across cycles have been aiding stable RoAs over the years. At CMP, the stock trades at 1-year forward multiple of 3.7x. Marginally tweaking our earnings estimates for FY20E/FY21E, we maintain our BUY recommendation on the stock with an SOTP-based Target Price of Rs2,650 (based on 3.7x FY21E adjusted PBV and the value of its subsidiaries, implying a FY21 P/ABV of 3.8x).
BUY
Credit growth beat the industry growth rate driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method, valuing standalone banking business at 3.4x of FY21 ABV and its two subsidiaries at Rs135/share. We recommend a Buy on the stock, with a target price of Rs 2,500.
BUY
Considering the healthy balance sheet growth, superior asset quality & management (overhang of near-term leadership change to stay), the bank is well poised to deliver consistently with margin leadership & robust return ratios. The bank remains a portfolio stock with premium valuations. We revise our estimates to ~20% CAGR in NII, ~24% in PAT in FY19-21E. We upgrade our target price to Rs 2700 valuing at ~21x FY21E EPS (3.6x FY21E ABV) and include Rs 150 per share for HDB Financial Services. We maintain our BUY recommendation.
BUY
We have revised our NII estimates by 1.6%/-0.3%, revised our PPOP estimates by -0.2%/-2.1% and PAT estimates by -0.5%/-2.9% for FY20/FY21, respectively. We have retained Accumulate rating on HBL and revised our target price to Rs2,547 (from Rs2,514 earlier), valuing the stock at 3.2 FY21E P/BV.
ACCUMULATE
We maintain our estimates - factored an Advance and PAT CAGR of 25% over FY19-20E with an improving NIM profile and lower credit costs aiding an improved RoA at ~2.0%.
BUY
HDFCB has been consistently gaining market share across retail product segments. The bank’s strong capitalization and liquidity levels are likely to help it sustain this growth momentum. We expect HDFCBK to deliver 22%/22% loan book/PAT CAGR over FY19-21. Margins are likely to remain stable, while strong control on operating leverage is likely to result in steady return ratios (RoA/RoE of 1.9%/17.2% in FY21E). We maintain our Buy rating with a target price of INR2,650 (3.7x FY21E ABV for the bank).
ACCUMULATE
HDFCB earnings were better with growth of ~23% YoY at Rs58.8bn (PLe: Rs57.7bn) on back of strong NII growth of ~23% and lower provisioning as asset quality was largely steady. Bank consciously has slowed retail growth in certain segments which grew at 19% YoY, while overall loan growth was supported by non-retail which were largely short term in nature (some NCLT backing). Tone on Agri continues to remain cautious and hence continues to add to contingent provisions. Bank has been able to retain superior NIMs on well managed portfolio mix but liabilities seem to be a challenge in near term and hence we keep an eye on cost of funds. Structurally bank continues to deliver 20% CAGR earnings with better margin profile and strong asset quality, leading us to retain BUY rating with revised TP of Rs2,700 (from Rs2,371) as we roll forward to Mar-21 ABV based on 3.9x multiple.
BUY
Credit growth beat the industry growth rate, driven by strong retail business. The strong liability franchise and healthy capitalisation provides earnings visibility. We value HDFC Bank using SOTP method valuing standalone banking business at 3.3x of FY21 ABV and its two subsidiaries at Rs 146/share. We recommend a Buy on the stock, with a target price of Rs 2,500.
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HDFC Bank currently trades at 4.1x/3.4x its FY2020E/FY2020E BVPS, which we believe is justified for a bank with its strengthsand consistency. We introduce FY2021E estimates and have accordingly rolled over our price target (PT) to FY2021E. We maintain our Buy rating on the stock with a revised PT of Rs. 2,650.
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