HDFC Bank:

In continuation of our last post, we will be looking at the numbers of HDFC Bank today. This bank has given a consistent growth of 30% almost from last ten years. Recently we have seen that growth had slow down. Which is natural with any business in these free market.

We have not seen this business trading below its intrinsic values even during bad times. This is the business where if you had bought them at expensive price you would have still made handsome returns. But this is exception for HDFC Bank.

The numbers look like this for the 2015.

HDFC Bank March 2015 March 2014 % change
Loan Book 383,407.97 315,418.86 22%
Investments 164,272.61 119,571.06 37%
Deposits 450,283.65 367,080.33 23%
Interest earned 50,666.49 42,555.02 19%
Other income 9,545.69 8,297.50 15%
Cost to income ratio 24% 25%
Operating profits 18,346.20 14,937.42 23%
Provisions 2,266.75 1,726.75 31%
Reported Profits 10,700.05 8764.51 22%
Gross non-performing assets 3,438.38 2,989.28 15%
Capital invested by shareholders 63,154.06 44,166.63 43%


The numbers are very strong compare to the Axis Bank, this is the reason Axis Bank is trading at PE ratio of 21 times and HDFC Bank at 26 times. Anyways, PE ratio doesn’t make any sense or interprets whether stock is trading cheap or expensive. We will talk about it in our next post in regards to it.

Looking at the financial results of 2015, we came to conclusion that HDFC Bank fair value for the year 2015 to be Rs 500 per share. Looking at the consensus earnings expectation by analysts, we do not expect any change in its intrinsic value for the year end 2016 (will be in range of Rs 450 – 500 per share) and for the year 2017 it will be in range of Rs 580 – 630. These numbers are not that exciting because many analysts think that banks will need fresh capital to adjust their Balance sheet for coming years.

Looking at the historical performance of valuations we expect its intrinsic value for the year 2016 to be Rs 594 and for the year 2017 to be Rs 707. They are still trading at a very high price. The million dollar question to new shareholders is, is it worth buying this bank at premium price? Well, my answer is very straight forward and I will not buy any stock at premium price.

We do own a very tiny part of HDFC Bank in our portfolio. We were lucky to get them at fair price two years back.

Happy Investing!!