RESULTS UPDATE: Ambit
HDFC Bank (SELL): In-line results; stock fully valued
HDFC Bank's balance sheet continues to grow at a rapid pace of ~29% but the growth is coming at the expense of NIMs (declined ~20bps YoY) despite a ~10bps kicker in NIMs from the recent capital raise of Rs100bn. Hence net profit growth at 20% YoY and EPS growth at 15% YoY continue to lag balance sheet growth. With our expectation of weak GDP growth for FY16-17, we expect loan growth for the banking system to remain muted (11%-12%) between FY16-18 leading to elevated competitive intensity on pricing of loans. Moreover, we expect the 23 new banks to further intensify competition for low-cost liabilities for the incumbents. Hence, growth for the bank would come at the expense of NIMs and cost pressures. Overall, we expect standalone earnings CAGR of 20% over FY15-FY18E, EPS CAGR of 18% over FY15-18E and average RoEs of 19.1% over FY16-FY18E. The current valuation multiple of 20x one-year forward P/E and 3.5x one-year forward P/B, at a 20%-50% valuation premium over peers, is largely capturing the medium-term superior earnings growth of the bank. (Pankaj Agarwal, CFA, +91 22 3043 3206)
-- HDFC Bank (SELL): In-line results; stock fully valued
HDFC Bank's balance sheet continues to grow at a rapid pace of ~29% but the growth is coming at the expense of NIMs (declined ~20bps YoY) despite a ~10bps kicker in NIMs from the recent capital raise of Rs100bn. Hence net profit growth at 20% YoY and EPS growth at 15% YoY continue to lag balance sheet growth. With our expectation of weak GDP growth for FY16-17, we expect loan growth for the banking system to remain muted (11%-12%) between FY16-18 leading to elevated competitive intensity on pricing of loans. Moreover, we expect the 23 new banks to further intensify competition for low-cost liabilities for the incumbents. Hence, growth for the bank would come at the expense of NIMs and cost pressures. Overall, we expect standalone earnings CAGR of 20% over FY15-FY18E, EPS CAGR of 18% over FY15-18E and average RoEs of 19.1% over FY16-FY18E. The current valuation multiple of 20x one-year forward P/E and 3.5x one-year forward P/B, at a 20%-50% valuation premium over peers, is largely capturing the medium-term superior earnings growth of the bank. (Pankaj Agarwal, CFA, +91 22 3043 3206)
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