||NSE: HDFCBANK | BSE: 500180
||₹ 4,46,065 Cr (USD 58.5 Bn)
|CMP First Reached
||5th April 2020
||Reasonably Valued Core
Why we like this stock:
- India’s most valued private sector bank, and strong on technology and reach
- Consistent long term growth of 15%-25% every year for the last 20 years
- ROE at 17% and P/E of 17 which is a relative low from earlier
- No housing loans, low corporate exposure, strong lending framework for risk
- Funding costs at 5%, one of the lowest due to a 40%+ CASA
- NIM of 4.3% due to the lower funding costs.
- Fee income at 27%, strong franchise.
- Owns HDFC Securities and HDB Financial, strong players in their space.
- Gross NPA at 1.4%, Net at 0.4%, provision coverage at 71%. Gives room for lockdown related NPAs later.
- Big collector of float all over – is present everywhere, from NSE to income tax collection etc.
What could go wrong:
- CMD Aditya Puri is leaving soon, and the replacement may not be as charismatic
- Slowdown in the economy after Covid can spike up NPAs
- There’s no guarantee banks will continue to get rich valuations going forward
- FII exits can hurt stock as it’s the largest weight in indexes
- Competition will heat up as PSU mergers complete and low cost of funds across the spectrum
- Banking will hurt if interest rates remain low for long periods.
Strong large-cap private sector bank that we believe will benefit when the money comes back in.
5 year Price Chart: