Maintain 'hold' on HDFC Bank – TP Rs.682 - Geojit BNP Paribas

- Hold rating is maintained on HDFC Bank with a target price of Rs. 682. The stock is currently traded in the range of Rs.660.

- HDFC Bank's NII at Rs. 3800 crore is up 21.9% y-y and 1.8%q-q, but lower than analyst's estimates as NIM declined 10bps q-q to 4.1%, as dividend income from MFs was absent.

- Other income grew 26.7% y-y and 33.7% q-q, helped by fee income growth of 16% q-q and treasury gains of Rs.140 crore.

- Asset quality showed marginal uptick with some delinquencies in CV (commercial vehicles) and CE (construction equipments) segments.

- While assets grew 14.4% yoy and 1.7%q-q (as derivatives exposure was reduced from both assets and liabilities sides of balance sheet, similar to 2QFY13), advances grew 24%y-y and 4.2%q-q.

- Core operating profit (ex-treasury) grew 17.4% y- y and 7.9% q-q. It is expected that core operating profit growth to return to over 20% q-q.

- HDFCB The bank has clarified that the uptick in NPL was only in CV and CE segments, where delinquencies were normalising from very low levels. Hence, there is not much worry about asset quality at this juncture with expectations of macroeconomic improvement.

- Continue to like HDFC Bank's business model, but believe that most of the positives are already priced in.

- Its premium over peers is still high despite declining from recent highs and it seems that any substantial upmove in stock price is unlikely in the near term. Maintain 'hold' rating.

Source : Equity Bulls

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