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HDFC Bank

Industry Banks
Code NSE: HDFCBANK | BSE: 500180
Market Cap ₹ 4,46,065 Cr (USD 58.5 Bn)
1-year Return -22%
CMP First Reached July 2017
Date Added 5th April 2020
CM Framework Reasonably Valued Core
CMP ₹ 896.1
Recommendation Buy

 

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:

HDFC Bank