Company Report | Q1FY12 Result Update

LONG TERM INVESTMENT CALL

20 July 2011
Industry CMP (INR) Target (INR) 52 week High/Low (INR) Market Cap (INR BN) 3M Avg. Daily Volumes P/BV FY12E Shareholding Pattern (%)
Promoters Others 37% 23%

HOLD

Banking 510 520 516/498 / 1192 834410 4.1x

Q1FY12 Result Highlights

HDFC Bank (HDFCB) delivered another strong quarter growth, with net profit increasing by 33.7% to INR 10.8 Bn YoY. This was supported by strong loan growth of 29.1% YoY to INR 1.76 Tn. Deposits grew 15.4% YoY to INR 2.11 Tn, while the CASA ratio stood at 49.1%.

In Q1FY12 net interest income grew by 18.6% YoY to INR 28.48 Bn supporting core net interest margins (NIMs) which were stable at 4.2% on account of increasing advances and stable CASA. Going forward, margins are likely to remain stable within the range 3.9% to 4.3%.

Institutions 11%

FII 29%

The non interest income for the quarter grew by 19.1% to INR 11.2 Bn YoY, primarily contributed by fees and commissions of INR

Stock Performance

9.22 Bn (up 15.9% compared to INR 7.96 Bn in Q1FY11) and foreign exchange/derivative revenues of INR 2.3 Bn (up 33.9% against INR 1.7 Bn in Q1FY11). Given the increase in bond yields, HDFC Bank incurred a loss on revaluation/sale of investments of INR 412.9 Mn for Q1FY12 as compared to a gain of INR 215 Mn

300 Jul Sep Nov Jan May Mar Jul

for Q1FY11. Cost to income ratio increased to 48.7% in Q1FY12 from 47.6% YoY.

HDFCB NSE Nifty

The banks asset quality remained healthy in Q1FY12 on the back of lower slippages. The gross & net NPAs declined to 1.04% &

Performance (%) 1 Month HDFCB 11.1 NIFTY 6.8

* Source: Ace, Unicon Research

3 Months 8.8 -2.2

1 Year 24.7 4.2

0.18% from 1.21% & 0.28% in Q1FY11 respectively. NPA coverage ratio improved to 83% from 77% YoY. It also maintained a healthy capital adequacy ratio (CAR) of 16.9% with tier I capital of 11.4%

(INR in mn)

Particulars NII Operating Profit PAT

Actual 28480 20334 10850

Estimates 30929 23388 12800

in Q1FY11. Outlook & Valuation Going forward, HDFC Bank is expected to keep ~24% of credit growth & also expected to maintain the CASA ratio at ~50%. On the back of continuous growth momentum, strong business & credit growth, improvement in asset quality & strong capital adequacy,

* Source: Ace, Unicon Research

Analyst Shweta Rane | srane@uniconindia.in

HDFC bank commands a premium in its valuations. At the CMP stock trades at 4.1x its FY12E book value. We have HOLD rating on

the stock for a target price of INR 520. Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in

Financials
(INR in mn)

Interest income Interest expense Net Interest Income Other Income Total Operating income Operating expenditure Operating Profit Operating Profit (%) Provisions PBT Tax PAT EPS (INR.) NIMs
Source: Company, Unicon Research

Q1 FY12 59780 31300 28480 11200 39680 19346 20334 34.01 4437 15897 5047 10850 23.24 4.2

Q1 FY11 44202 20190 24011 9399 33410 15923 17487 39.56 5550 11937 3820 8117 17.66 4.3

Y-o-Y 35.24 55.03 18.61 19.17 18.77 21.50 16.28 -554 bps -20.06 33.18 32.13 33.67 31.64 -9 bps

Q4 FY11 54686 26291 28395 12558 40952 19984 20969 38.34 4313 16655 5508 11147 23.96 4.2

Q-o-Q 9.32 19.05 0.30 -10.81 -3.11 -3.19 -3.03 -432 bps 2.86 -4.55 -8.37 -2.67 -2.99 0 bps
*Standalone

Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in

Unicon Investment Ranking Methodology

Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd. Email: wealthresearch@uniconindia.in