Multi Baggers

Hem Securities

5.30 AM Jan 1st 1970

HDFC Bank

BSE ID : 500180 NSE ID : HDFCBANK

RECOMMENDED PRICE 1991.90

PEAK FROM RECO 1757.80 -11.75%

CURRENT PRICE 1509.75 Resource id #18

HDFC bank was incorporated in August 1994 with its registered office in Mumbai, India. & commenced operations in January 1995. On the back of healthy balance sheet & strong growth parameters, we find bank a suitable candidate for long term investment. Hence, we recommend ``Buy`` on the stock with price target of Rs. 2500(appreciation of almost 25%) for long term investment.

HDFC bank was incorporated in August 1994 with its registered office in Mumbai, India. & commenced operations in January 1995. As of March 31, 2018, the Bank’s distribution network was at 4,787 banking outlets and 12,635 ATMs across 2,691 cities/towns. Bank currently has branches at three locations outside India. These are at Bahrain, Hong Kong and Dubai International Finance Centre (DIFC) in Dubai. The DIFC branch offers advisory services to High Net worth Individuals and Corporates.

Strong increase in retail credit: Bank has witnessed whopping growth of almost 28% in its retail credit offtake in Q4FY18 as compare to Q4FY17 which is majorly contributed by Auto Loan (Approx 21% of total retail credit in Q4FY18) followed by personal loan (Approx 19.8% of total retail credit in FY18). Other components of retail credit includes Home Loan, Business Banking, Credit Card Gold Loan & Loan Against Securities.

Consistency in managing asset quality: For Q4FY18 co’s gross non-performing assets were at 1.30% of gross advances as against 1.29% as on Q3FY18 and 1.05% as on Q4FY17. Net nonperforming assets were at 0.4% of net advances as on Q4FY18. Since FY10 bank has been successfully managing its GNPA% anywhere between 1%-1.5% while NNPA % has been managed between 0.1 % -0.5 % thus reflecting strong management of asset quality since last 8 years.

Healthy & stable Net Interest Margin %: Bank has been consecutively posting healthy NIM % of more than 4% since FY11 on the back of higher CASA ratio & higher share of fixed rate retail loan.

Strong Network: During FY18, bank added 72 branches taking its physical distribution network to 4,787 branches in 2,691 cities/towns. Number of ATMs increased to 12,635 from 12,260 during the same period. The Bank grew its customer base to 4.30 crore from 4.05 crore with a continued focus on semi-urban and rural markets that accounted for almost 53 per cent of its branches.

The bank is currently trading at 4.70x of FY18 book value of Rs 423.39 while it is trading at 4.00x of FY19E book value & 3.33xof FY20E book value. Bank’s credit portfolio being amongst the one of the best portfolio quality both in wholesale & retail credit segment in industry. Also bank stands firm with the lowest deposit costs in the industry. Bank’s margins are healthy due to higher proportion of product mix of retail loans & margins are relatively stable across interest rate & economic cycles. On the back of healthy balance sheet & strong growth parameters, we find bank a suitable candidate for long term investment. Hence, we recommend “Buy” on the stock with price target of Rs 2500(appreciation of almost 25%) for long term investment.

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HDFCBANK_Muntibugger_Hem.pdf