Accumulate HDFC Bank - Q3FY15 Result Update - Sushil Finance

HDFC Bank Ltd. has reported good set of numbers for the quarter ended December'14 with healthy advances growth & stable asset quality. We attended the conference call of the company and following are the key highlights of the results.

Key Highlights of Q3FY15 Results

- Healthy advances growth (~17% YoY & 6% QoQ) coupled with stable NIMs (~4.4%) resulted in healthy NII growth which grew by ~23% YoY & 3% QoQ to Rs.57 bn. Non-Interest income registered 18% YoY growth with core-fee income growth at ~12% YoY (excl forex) majorly led by pick-up in third-party distribution & retail biz. However management doesn't foresee immediate catch-up of fee income with credit or NII growth. Operating expenses grew by ~19% YoY & were flattish sequentially resulting in PPOP growth of 23% YoY to Rs.47.8 bn. Healthy NII growth, stable margins along with higher non-interest income resulted in PAT growth of ~20% to Rs.27.9 bn.

- Advances grew by ~17% YoY & 6% QoQ with growth witnessed in both domestic retail & wholesale segment with loan mix at 51:49 (Retail/Wholesale). Segments in Retail witnessing healthy growth were Auto/Home Loans/Credit Cards/Personal Loans etc. On deposits front, CASA grew by 18% YoY & flat sequentially with savings & current account deposit growth at 19% & 18% YoY resp. CASA ratio was flat YoY while it declined QoQ to 40.9%.

- Asset Quality remained stable with GNPA & NNPA at 0.99% (Q2-1.0%) & 0.26% (Q2-0.3%) resp. with incremental slippages becoming stable at ~1.4-1.5% over the last 4 quarters. Slippages for Q3 stood at Rs.11.6 bn (i.e.~1.4% on annualized basis). Total Credit Cost for Q3 & 9MFY15 stood at 16 bps & 46 bps resp. while PCR stood at 74%. Restructured book stood at 0.1% v/s 0.2% YoY. CRAR under Basel III stood at ~15.7% of which Tier – I CAR was at ~11.9%.

- Management Guidance: 1) Expect credit growth to be ~5-6% higher than industry growth. 2) NIMs likely to remain stable going forward. 3) Asset quality likely to remain stable with some improvement being witnessed in CV/CE segment. 3) C/I to remain at ~44-45% on the full-year basis. 4) Credit cost for FY15E likely to be ~55-60 bps.

OUTLOOK & VALUATION

Healthy advances growth, better NIMs coupled with stable asset quality has helped bank deliver good set of numbers in the current quarter. Strong execution coupled with welldefined strategy has enabled bank to deliver above industry growth in such precarious economic scenario. Going forward, with revival in economy & higher contribution from rural penetration, we expect bank to post strong growth going forward. Minimal exposure to stress sectors & lower restructuring book is likely to keep asset quality intact. Hence, considering the sound fundamentals & strong growth prospects, we remain positive on the stock & recommend 'Accumulate' with a revised price target of Rs.1200 based on our FY17E estimates.

Shares of HDFC BANK LTD. was last trading in BSE at Rs.1065.15 as compared to the previous close of Rs. 1082.3. The total number of shares traded during the day was 450291 in over 14065 trades.

The stock hit an intraday high of Rs. 1105 and intraday low of 1059.75. The net turnover during the day was Rs. 489082246.

Source : Equity Bulls

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