BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING HDFC BANK LTD Stock Coverage Date 21 ST May 2018 BSE Code 500180 NSE Code HDFC BANK Market Cap (Rs Cr) 517296.43 52 week High/Low 2064.90/1545.1 Industry Bank-Private Face Value Rs 2/Share Shares O/S (In No) 259.70 Cr EPS * 71.27 Book Value* 423.39 P/E 27.95 P/B 4.70 *Note: On Consolidated FY’18 financials basis Shareholding Pattern as on Mar’ 2018 Research Analyst : Astha Jain 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. Valuation 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. www.hemsecurities.com For Private Circulation Only HEM RESEARCH BUY CMP 1991.90 TARGET 2500 LONG TERM INVESTMENT
Transcript
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
HDFC BANK LTD
Stock Coverage
Date 21ST May 2018
BSE Code 500180
NSE Code HDFC BANK
Market Cap (Rs Cr) 517296.43
52 week High/Low 2064.90/1545.1
Industry Bank-Private
Face Value Rs 2/Share
Shares O/S (In No) 259.70 Cr
EPS * 71.27
Book Value* 423.39
P/E 27.95
P/B 4.70
*Note: On Consolidated FY’18 financials basis
Shareholding Pattern as on Mar’ 2018
Research Analyst : Astha Jain
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.
Valuation
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.
www.hemsecurities.com
For Private Circulation Only HEM RESEARCH
BUY CMP 1991.90 TARGET 2500 LONG TERM INVESTMENT
HDFC BANK LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
The Housing Development Finance Corporation Limited (HDFC) was amongst the first 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 was incorporated in August 1994 & 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 .
Subsidiaries
HDFC Securities Limited (HSL) is amongst the leading retail broking firms in India . As on March 31,
2018, the Bank held 97.7% stake in HSL. For the year ended March 31, 2018, HSL’s total income
grew by 42.5% to Rs 788.3 crore. Net profit for the year was Rs 344.4 crore, a growth of 59.5% over
Rs 215.9 crore in the previous year.As on March 31, 2018 HSL had 259 branches across 171 cities /
towns in the country.
HDB Financial Services Limited (HDBFSL) is a non-deposit taking non-bank finance company
(‘NBFC’) offering wide range of loans and asset finance products to individuals, emerging businesses`
and micro enterprises. As on March 31, 2018, the Bank held 95.9% stake in HDBFSL & its balance
sheet size was at Rs 44,754 crore. As on March 31, 2018, HDBFSL had 1,165 branches across 831
cities / towns.
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HDFC BANK LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Robust growth in Retail Credit HDFC Bank is a leading player in the automobile financing business with over 15 years of experience in customer lending & overall value chain. It has a multi & omni channel approach to reaching out its customers. The bank is also a digital pioneer & uses biometrics in its loan processing modules.Its app Autopedia facilitates vehicle research,test drives, vehicle selection ,valuation & exchange of vehicles & loans – a first for any kind of automobile financier. Bank is a leader in the Auto Loans segment with a strong presence in commercial vehicle and two wheeler financing. The growth in bank’s retail banking business was robust during the FY18. The Bank’s retail advances grew by whopping 28% in Q4FY18 as compare to last year Q4FY17. In retail Credit, personal loan segment grew by whopping 43 % in Q4FY18 while Business Banking Segment reported growth of 49% during the same qtr as compare to Q4FY17.
Rs Cr.
Retail Credit Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18
Auto Loan 62052 66011 69053 73057 76427
Personal Loan 50067 55539 60692 66817 71876
Home Loan 38365 38783 40015 38129 36257
Business Banking 36235 40446 45528 46989 54126
Kisan Gold Card 28258 27685 31104 31071 34671
Credit Card 25995 29101 30831 33622 36115
CV/CE 19221 19706 20252 21403 23391
Others 10923 12589 13318 13858 14073
Two Wheelers 6290 6532 6883 7691 8672
Gold Loan 4800 4987 5068 5057 5065
Loan Against Securities 1461 1447 1604 1671 1816
Bank operates in the Home Loan business in conjunction with HDFC Limited. As per this arrangement, the former sells loans provided by the latter through its branches, while the latter approves and disburses it. The Bank receives sourcing fee for these loans and has the option to purchase up to 70 per cent of the fully disbursed loans either through the issue of mortgage backed Pass Through Certificates (PTCs) or by a direct assignment of loans. The balance is retained by HDFC Limited. Bank originated, Rs 36257 crore of Home Loans in Q4FY18. Bank is a market leader in credit cards with having 8.5 mn cards in FY18. Over 70% of new credit cards issued to existing customers in FY18.
For Private Circulation only HEM RESEARCH
HDFC BANK LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Healthy Asset Quality
The Bank has a comprehensive centralised risk management function, independent of the operations and business units of the Bank. Portfolio diversification, prudential ceilings across various dimensions (individual/ borrower group, industry, credit risk rating grades and country), product mix, security structures and periodic as well as proactive reviews facilitate risk mitigation and management. Bank did not witness any significant deterioration in overall asset quality and continues to maintain the highest standards of governance in respect of recognition and provisioning of non-performing loan. With all above, bank has been successful in managing GNPA% under the range of 0.9-1.4% while NNPA% has been maintained between 0.3-0.45% since FY11.Going ahead we expect bank to maintain its asset quality within the above mentioned limit
Stable NIM% & adequate CAR% Bank has been consistently posting NIM% of more than 4.2% since FY’11 on account of higher CASA ratio as bank has reported CASA ratio of more than 43% since FY’11.Also higher share of fixed retail loan helps in maintaining bank’s percentage of net interest margin consistently above 4% . However in Fy17 bank has witnessed sharp surge in CASA ratio of upto 48% largely due to the demonetisation exercise. The Bank’s total Capital Adequacy Ratio (CAR) as per Basel III guidelines was at 14.8% as on March 31, 2018 (14.6% as on March 31, 2017) as against a regulatory requirement of 10.875% including Capital Conservation Buffer of 1.875%. Tier 1 CAR was at 13.2% as of March 31, 2018 compared to 12.8% as of March 31, 2017. Common Equity Tier 1 Capital ratio was at 12.2% as of March 31, 2018 thus depicting that bank is adequately capitalized.
For Private Circulation only HEM RESEARCH
For Private Circulation only HEM RESEARCH
www.hemsecurities.com
HDFC BANK LTD
Consolidated P&L A/c
Rs Cr
Particulars FY16 FY17 FY18 FY19E FY20E
Total Income 74373.22 86148.99 101344.45 121613.34 145936.01
Growth % --- 15.83 17.64 20.00 20.00
Total Exp 51901.46 58792.65 66308.70 79048.67 94858.41
Pre Prov Profit 22471.76 27356.34 35035.75 42564.67 51077.60
JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757
GROUP COMPANIES
HEM FINLEASE PRIVATE LIMITED
MEMBER-NSE
HEM MULTI COMMODITIES PRIVATE LIMITED
MEMBER-NCDEX, MCX
HEM FINANCIAL SERVICES LIMITED
NBFC REGISTERED WITH RBI
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