HDFC Bank Ltd - Research Report
Private Client Research
Rating
Buy
Sector
Bank - Private
Company
Bank - Private
March 13, 2019
Sensex: 37752.17
CNX Nifty: 11341.70
NSE: HDFCBANK
BSE: 500180
Reco Price
Rs. 2222
Price Target (3 - 6 Months)
Rs. 2780
Upside
25.11%
Date
March 13, 2019
Sensex
37752.17
CNX Nifty
11341.70
Exchange
Code
NSE
HDFCBANK
BSE
500180
Stock Data
CMP (Rs)
2226.55
Face value (Rs)
2
52 Week Range (Rs)
2220.00 - 1833.50
Market cap (Rs Crores)
605932.79
Price To Book Value (x)
4.38
P/E Ratio (x)
31.32
EV/EBIDTA (x)
17.08
One Year indexed Stock Performance
HDFC Bank Ltd
Sensex
Return (%)
1m
6m
12m
36m
Absolute
4.01
9.70
19.69
116.58
Sensex
4.77
-0.89
11.51
52.20
Shareholders
(in %)
31-Dec
Promoter
26.54
Public
73.46
Others
00
Total
100
+91 22 6639 3000
research@stockaxis.com
Profile
Founded in 1995 by Housing Development Finance Corporation Limited (HDFC), HDFC Bank was one of the first private banks to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of RBI's liberalisation of the Indian Banking Industry in 1994. The bank is now the largest private sector bank in India in terms of total assets and market capitalization. Headquartered in Mumbai, the bank's distribution network has reached 4,963 branches across 2,727 cities with 13,160 ATMs.
The bank has three key business segments, namely, Wholesale Banking, Retail Banking, and Treasury.
In Wholesale Banking, the bank's target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporates and agri-based businesses. For these customers, the bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc.
In Retail banking, the bank provides its retain and HNI customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements.
In treasury business segment, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities.
Leading Company in the leading sector
Industry:
The Indian banking system consists of 27 public sector banks, 21 private sector
banks, 49 foreign banks, 56 regional rural banks, 1,562 urban cooperative banks
and 94,384 rural cooperative banks, in addition to cooperative credit institutions.
In FY07-18, total lending increased at a CAGR of 10.94% and total deposits increased
at a CAGR of 11.66%. India’s retail credit market is the fourth largest in
the emerging countries. It increased to US$ 281 billion on December 2017 from US$
181 billion on December 2014.
Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth for the Indian banks. All these factors suggest that India’s banking sector is also poised for robust growth as the rapidly growing business would turn to banks for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services to the fore. The banking sector is laying greater emphasis on providing improved services to their clients and also upgrading their technology infrastructure, in order to enhance the customer’s overall experience as well as give banks a competitive edge.
Business in Graphs (Rs. Crore)
Financial Performance:
| DESCRIPTION | FY06 | FY07 | FY08 | FY09 | FY10 | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest Earned | 4475.00 | 6646.00 | 10117.00 | 16314.00 | 16233.00 | 20043.00 | 28193.00 | 35861.00 | 42555.00 | 50666.00 | 63162.00 | 73271.00 | 85288.00 |
| Interest Expended | 1929.00 | 3179.00 | 4887.00 | 8903.00 | 7798.00 | 9425.00 | 15106.00 | 19695.00 | 23445.00 | 27288.00 | 34070.00 | 38042.00 | 42381.00 |
| Net Interest Income | 2546.00 | 3467.00 | 5230.00 | 7411.00 | 8435.00 | 10618.00 | 13087.00 | 16166.00 | 19110.00 | 23378.00 | 29092.00 | 35230.00 | 42906.00 |
| Growth (%) | 36.20% | 50.80% | 41.70% | 13.80% | 25.90% | 23.30% | 23.50% | 18.20% | 22.30% | 24.40% | 21.10% | 21.80% | |
| NIMs | 4.00% | 4.30% | 4.40% | 4.20% | 4.30% | 4.20% | 4.20% | 4.50% | 4.40% | 4.40% | 4.30% | 4.30% | 4.30% |
| Other Income | 1156.00 | 1577.00 | 2376.00 | 3437.00 | 4210.00 | 4585.00 | 5992.00 | 7133.00 | 8298.00 | 9546.00 | 11212.00 | 12878.00 | 16057.00 |
| Total Income | 3702.00 | 5044.00 | 7605.00 | 10847.00 | 12645.00 | 15203.00 | 19080.00 | 23299.00 | 27407.00 | 32924.00 | 40304.00 | 48107.00 | 58963.00 |
| Operating Expenses | 1715.00 | 2474.00 | 3826.00 | 5649.00 | 6081.00 | 7318.00 | 9495.00 | 11552.00 | 12470.00 | 14578.00 | 17832.00 | 20751.00 | 23927.00 |
| Provisions and Contingencies | 725.00 | 925.00 | 1485.00 | 1880.00 | 2144.00 | 1927.00 | 1917.00 | 1742.00 | 1726.00 | 2266.00 | 2961.00 | 3991.00 | 6572.00 |
| Profit Before Tax | 1262.00 | 1645.00 | 2294.00 | 3318.00 | 4420.00 | 5958.00 | 7668.00 | 10005.00 | 13211.00 | 16080.00 | 19511.00 | 23366.00 | 28464.00 |
| Taxes | 386.00 | 502.00 | 702.00 | 1066.00 | 1387.00 | 1940.00 | 2395.00 | 3104.00 | 4447.00 | 5380.00 | 6694.00 | 8078.00 | 9903.00 |
| Profit After Tax | 876.00 | 1143.00 | 1592.00 | 2252.00 | 3033.00 | 4018.00 | 5273.00 | 6900.00 | 8765.00 | 10700.00 | 12817.00 | 15287.00 | 18561.00 |
| Minority Interest | (3) | (3) | (7) | (6) | (33) | (32) | (30) | (34) | (25) | (14) | (20) | (37) | (51) |
| Share of Associate | 8.00 | 11.00 | 10.00 | 3.00 | 3.00 | 7.00 | 4.00 | 3.00 | 4.00 | 3.00 | 4.00 | 2.00 | 1.00 |
| Consolidated Net Profit | 882.00 | 1151.00 | 1595.00 | 2249.00 | 3004.00 | 3992.00 | 5247.00 | 6870.00 | 8743.00 | 10689.00 | 12801.00 | 15253.00 | 18510.00 |
| Growth (%) | 30.60% | 38.60% | 41.00% | 33.60% | 32.90% | 31.40% | 30.90% | 27.30% | 22.20% | 19.80% | 19.20% | 21.40% | |
| Adjusted EPS | 5.63 | 7.21 | 9.00 | 10.57 | 13.12 | 17.16 | 22.36 | 28.87 | 36.45 | 42.64 | 50.63 | 59.63 | 71.33 |
Outlook :
HDFC Bank ranks in that rare breet of corporate that have increased their profits
a high rates YoY ervery year in the past decade and a half. The growth rate has
never been below 19% in the bank’s over 25 year history. We believe that banking
is an evergreen sector which will continue to grow with the economy. As the sector
will grow, the leader will also keep posting decent growth which will be above the
growth rate of the overall sector.
Technical
Strong Market Leader ready for further upside.
Price: HDFC Bank has proven to be a consistent leader in the past and we are expecting this leadership to continue. The stock has given a fresh bullish breakout from an important resistance range of 2200-2220, these levels were tested several times in the previous few months. Since the stock and the entire private sector banking space has outperformed the markets by a big margin and with all the important moving averages sloping upwards suggests us that the stock is heading higher towards new highs.
Volume: Price and volume analysis plays an important part in determining overall strength or weakness in the stock. Price & volume pattern are moving in the same direction which reflects the true movement in the stock, HDFC Bank volume has been increasing gradually along with the price and after the breakout which confirms the bullishness in the stock.
Relative Strength Index: RSI is a momentum indicator that shows whether stock is in overbought or oversold territory. It reflects the strength of the stock as compared to the past. Daily RSI of HDFC Bank has been moving near the bullish zone which confirms that price and indicator are moving in the same direction and there is no divergence.
MACD: Moving Average Convergence Divergence is most effective momentum indicator of the trend. Crossover in MACD line with signal line shows buy signal in the stock. Daily, Weekly and intraday MACD of HDFC Bank has been moving in the positive territory which indicates that the stock has more upside.
Conclusion: Strong uptrend in stock, relative outperformance of counter and the sector to market, increase in volumes on the breakout, Long and short-term moving averages sloping upward suggests us that the stock is heading higher. Indicators like MACD and RSI are also showcasing strength in the overall trend, we recommend buying this stock at the current levels by keeping a stop below 2070 for a target of 2780.