HDFC Bank (SELL): Marginal deterioration in asset quality - AMBIT

HDFC Bank continued to extend its streak of near-clockwork 30% earnings growth trajectory in 1QFY14 amidst growing signs that the bank may soon run out of levers available to sustain such growth unless accompanied by a pick up in volumes in the corporate/wholesale segment. With the flagship retail segment (accounting for half of HDFC Bank's loan book) tightly contested by incumbents and aspirants alike, we see little scope for HDFC Bank to gain market share. Notwithstanding the healthy asset quality that HDFC Bank has seen in the retail segment over the past 12 quarters and the stability in CV-portfolio delinquencies that the bank reported during the March 2013 quarter, we believe that the rising competitive intensity makes HDFC Bank's retail portfolio vulnerable to product mispricing and rising customer leverage. We remain SELLers (currently quotes at 3.8x one-year forward ABVPS) with a valuation of Rs555, as credible challengers emerge at a valuation discount of 25-30%.

Source : Equity Bulls

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