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Multi Baggers

Ventura Securities

12.00 AM Jun 5th 2017


BSE ID : 500180     NSE ID : HDFCBANK


PEAK FROM RECO 1724.30 5.41%

CURRENT PRICE 1526.15 6.70%

We initiate a coverage on HDFC Bank with a BUY with a price objective of Rs 2174 representing a potential upside of 33.1% over in the next 30 months.


HDFC Bank has demonstrated an exemplary performance of high growth spanning two decades driven by an enviable AUM growth (CAGR of 29.1%), a pan India presence, product innovation, best in class asset quality and consistently high RoE aided by a strong management team with a pool of capable talent. Post the global melt down of 2008, while the Indian economy and particularly its peers have faced many challenges, the Bank has escaped the NPL imbroglio unscathed. Going forth as the Indian economy growth accelerates, we believe that HDFC Bank should be the biggest beneficiary and report numbers consistent with its historical performance.

HDFC Bank is our top pick in the banking space given that:

Loan book is all set to double over the period FY2017-21 (CAGR of 19.2%). Over the forecast period of FY17-20 we expect total credit to grow to Rs 9,98,277 crore driven by a 17.7% CAGR growth of its corporate book to Rs 4,59,207.5 crore and 21% CAGR growth of its retail book to Rs 5,39,070 crore. HDFC Bank is uniquely positioned to grab market share from its peers in the corporate lending space driven by its lower NPA levels and balance sheet strength which are the issues that have stymied the growth of PSU Banks. HDFC Bank is expected to maintain its leadership in the retail banking space through product innovation, enhanced cross sell / upsell and leveraging its pan India presence.

NIMs are expected to be maintained in the range of 4.2-4.6 over the forecast period notwithstanding the fact that corporate loans typically have lower NIMs.

Deposit growth (21.7% CAGR to Rs 11,59,129) crore is expected to keep abreast of the lending book. CASA ratio is expected to marginally dip by 100 bps to 47% by FY20.

Operational efficiencies are expected to kick in given the pervasive usage of technology, data analytics and slow down in hiring. We expect cost to income ratio to improve by 170 bps to 41.4% by FY20. In our opinion this is commendable as we expect the smaller private banking peers to witness higher cost income ratio given the increasing tilt to grow the retail franchise.

Its hallmark asset quality is expected to remain robust. However we have built in a 10 bps deterioration to 1.15% for the GNPLs and 2 bps to 0.35% for the NNPLs over the period FY17-20.

Return ratios RoA and RoE are expected to improve by 5bps & 144bps to 1.8% and 19.8% respectively by FY20.

Earnings are expected to grow at a CAGR of 20% to Rs 26,361 crore by FY20. We initiate with a strong BUY rating for a target of Rs 2174 (3.9X FY20 P/Adj BV) representing an upside of 33.1% from the CMP of Rs 1632 over a period of 30 months.


We initiate a coverage on HDFC Bank with a BUY with a price objective of Rs 2174 (4.0XFY20 P/Adj BV) representing a potential upside of 33.1% over in the next 30 months. Currently the stock is trading at 3.0X FY20 P/Adj BV.


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Disclosures and Disclaimer: Ventura Securities Limited (VSL) is a SEBI registered intermediary offering broking, depository and portfolio management services to clients. VSL is member of BSE, NSE and MCX-SX. VSL is a depository participant of NSDL. VSL states that no disciplinary action whatsoever has been taken by SEBI against it in last five years except administrative warning issued in connection with technical and venial lapses observed while inspection of books of accounts and records. Ventura Commodities Limited, Ventura Guaranty Limited, Ventura Insurance Brokers Limited and Ventura Allied Services Private Limited are associates of VSL. 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