HDFC Bank - 4QFY2012 Result Update - Angel Broking

For 4QFY2012, HDFC Bank reported healthy 30.4% yoy growth in its net profit to Rs.1,453cr, in-line with ours as well as street's estimates. Improved margins on the back of higher CASA floats and traction in retail loan book along with strong network expansion during the quarter were the key highlights of the result. We maintain our Accumulate recommendation on the stock.

Another quarter of steady performance: HDFC Bank's net advances growth was strong at 22.2% yoy, while deposit buildup was also healthy, growing by 18.3% yoy. Adjusting for one-off spike in current account deposits in 4QFY2011, deposit growth stood at 20.6% yoy for 4QFY2012. The bank was the collecting banker for issuance of tax-free bonds for some of the issuers in 4QFY2012, which led to higher CASA floats (current account deposits up 11.9% qoq) during the quarter. Higher CASA floats coupled with increased traction in retail loan book (up 6.8% qoq) and run-down of some of the short-term low-yielding corporate loans led to higher margins (4.2%) for the bank during 4QFY2012. Fee income growth for the bank in 4QFY2012 was healthy at 25.4% yoy, primarily due to strong performance on commission-based fee income (issuance of tax-free bonds aided fee income growth during 4QFY2012). The bank maintained its strong assetquality track record during 4QFY2012 as well, with gross and net NPA ratios remaining stable at 1.0% and 0.2%, respectively. The bank added 343 branches during 4QFY2012, taking its total branch additions to 558 for FY2012 (compared to average annual addition of 200-300 branches). The strong increase in branch network coupled with processing fees on issuance of tax-free bonds led to higher operating expenses for the bank during 4QFY2012.

Outlook and valuation: HDFC Bank is currently trading at one-year forward 3.6x P/ABV (3.1x FY2014 ABV), higher than its median of 3.5x (over FY2005-12). We believe current valuations largely factor in the positives, leaving only a limited upside in the stock. We value the stock at 3.3x FY2014 P/ABV. Hence, we recommend Accumulate on the stock with a target price of Rs.567 (5.5% upside).

Source : Equity Bulls

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