Karvy rates HDFC Bank as Underperformer

hdfcIn its research report dated 10 August, 2009, Karvy Stock Broking has rated banking major HDFC Bank as underperformer. Karvy has given a price target of Rs 1100 for the stock.

Technical Expert Rakesh Kumar at Karvy informed that During the Q1FY10 quarter, HDBK's reported 7.2% (Y/Y) growth in advances; the bank continued to downsize eCBoP' s retail and SMEs credit book to the extent of almost Rs40 bn and Rs30 bn respectively. Erstwhile CBOP's Rs30 bn retail portfolio (EMI portion) would be run-off going forward.

The bank is cautious on unsecured lending particularly in personal loans, self-employed loans and credit card portfolio and expects some delinquencies. Under retail segment, the bank's management expects growth in secured lending. Going forward, the bank expects that the ratio of term loan and retail loans would tilt more towards term lending bringing the ratio to 25% / 75% from present ratio of 20% / 80%, we expect that this would result marginal improvement in yield on advances.

For Financial year FY09-11, Karvy expects the bank to grow at NII and net profit to grow by 23.3%, 23.6% and 20.5% CAGR respectively.

HDFC Bank has made a 52-week high and low of Rs 1584 and 774 respectively on NSE. The stock is currently trading at a P/E of 24.72 with EPS of Rs 56.

Major Mutual Funds holding the stock include Franklin India BlueChip Fund, SBI Magnum Tax Gain Scheme, ICICI Prudential Infrastructure Fund and Franklin India Flexi Cap fund.