HDFC Bank an underperformer: Karvy Stock Broking
Karvy Stock Broking has downgraded its rating on HDFC Bank from an outperformer to underperformer with a price target of Rs 903 in its March 30, 2009 research report.
“The bank’s management is of view that the system’s credit growth would be in range of 17-18% and the bank’s credit book is expected to expand by 21-24% in FY10. We expect that in FY08-10, HDFC Bank’s total business, NII and net profit to grow by 24.3%, 28.3% and 23% CAGR. Net interest margin would decline by 20 bps to 4.57%; we expect the bank to record RoAE of 15.1% in FY10. We reduce our net profit estimate for FY10 by 17.5% to Rs 26.5 billion.”
“We have valued the bank on three-stage DDM with cost of equity of 13.75% and terminal growth rate of 5.0%; we determine the bank’s fundamental value at Rs 903 at 2.1x adjusted book value FY10. We reduce our price target by 17.3% to Rs 903 from earlier target of Rs 1,092 and downgrade the bank’s rating from an Out Performer to Under Performer,” says Karvy Stock Broking’s research report.
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