Hold on HDFC Bank – TP Rs.514 - Geojit BNP Paribas Financial Services Limited

The bank has reported healthy performance for the quarter. However, the valuation appears fair and hence it has been downgraded to 'hold'.

Net interest income for the quarter at 3120 crore increased 12.2% yoy and higher than market estimates, driven by stable margin.

Net profit at Rs.1430 crore increased 31.4% yoy.

Earnings have been revised upward by 2.5% for FY12 and by 4% for FY13-14 because of higher other income, stable margins and stable credit costs.

Retail loan growth was strong at 29.5% yoy driven by strong growth in Commercial Vehicles and personal loan growth.

Wholesale loan growth was moderate at 15%.

Yield on advances inched up 34 bps qoq while cost of deposits increased only 23 bps leading to stable reported net interest margin (NIM) of 4.1% qoq.

The stock trades at 3.5 multiple of FY13 adjusted book value estimates, which implies significant outperformance and hence the stock is downgraded to 'hold'. It seems that most of the positives are priced in the current price.

During the last one year, the stock has outperformed the Bankex and the Sensex with a wide margin of 34%.

Source : Equity Bulls

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