06th September, 2019

INVESTMENT
IDEAS
HDFC BANK LIMITED CMP: 2234.70 Target Price: 2586 Upside: 16%

VALUE PARAMETERS Investment Rationale:

Current Mkt.Price (Rs.) 2234.70 • The financial performance of the bank remained healthy during
Q1FY20 as compared to its peers and management expects retail
Face Value (Rs.) 2.00 segment would play vital role to sustain its credit growth and core net
52 Week High/Low 2502.90/1884.40 interest margin.
M.Cap (Rs. in Cr.) 611275.81
• Total advances as of June 30, 2019 were Rs.8,29,730 crore, an increase
of 17.1% over June 30, 2018. Advances to the vehicle loan segment,
EPS (Rs.) 80.59 where sales volumes have seen some moderation, grew at 8.3% over
P/E Ratio (times) 27.73 the previous year. Domestic advances grew by 17.9% over June 30,
2018. Total deposits as of June 30, 2019 were Rs.9,54,554 crore, an
P/B Ratio (times) 3.93
increase of 18.5% over June 30, 2018. CASA deposits grew by 12.8%
Stock Exchange BSE and Bank’s continued focus on deposits helped in the maintenance of a
healthy liquidity coverage ratio at 126%, well above the regulatory
requirement.
SHAREHOLDING PATTERN
• The Bank’s total Capital Adequacy Ratio (CAR) as per Basel III
Foreign guidelines was at 16.9% as on June 30, 2019 (14.6% as on June 30,
9.81
2018) as against a regulatory requirement of 11.075%. Tier 1 CAR was
21.31 Ins tu ons
at 15.6% as of June 30, 2019 compared to 13.1% as of June 30, 2018.
50.51
Non Promoter Corporate
Common Equity Tier 1 Capital ratio was at 14.8% as of June 30, 2019.
4.69 Holding Risk-weighted Assets were at Rs.965,635 crore (as against Rs.844,894
13.69
Promoters crore as at June 30, 2018)

Public & Others • Provisions were quite high on the back of contingent provisions in
various sectors, NBFC/HFC and change in accelerated provisioning on
unsecured NPA book and business growth was slower than usual run
rate but the NIM profile remained stable and in a broad range.
P/B CHART Management sees NII growth remained strong on loan mix towards
retail growth.
3500.00

3000.00
• The bank hopes to bring the cost-to-income down by 300- 400 basis
2500.00
points over the next few years mostly through digitizing processes and
2000.00
digital marketing initiatives.
1500.00

1000.00
• On consolidated basis in FY 2019, it has registered 23% rise in Interest
500.00
income to Rs 105160.80 crore. A 27% rise in interest expenses to Rs
0.00
53712.69 crore saw net interest income (NII) grow 20% to Rs
10-Apr-19
14-Sep-15

26-Sep-16

29-Sep-17

8-Oct-18
2-Aug-18

14-Jun-19
16-Jul-15

25-Jul-16

31-Jul-17
16-Mar-15

21-Mar-16

29-Mar-17

10-Dec-18
5-Apr-18
5-Sep-14

7-Feb-19

14-Aug-19
5-Jun-18
13-Nov-14
13-Jan-15

18-Nov-15
19-Jan-16

28-Nov-16
25-Jan-17

30-Nov-17
31-Jan-18
19-May-15

25-May-16

31-May-17

51448.06 crore.
3.3 4.1 4.8 5.5 Close Price

Risk:

• Slowdown in domestic and international demand for end-markets

FINANCIAL PERFORMANCE (Rs.in Cr.)
ACTUAL ESTIMATES
FY Mar-18 FY Mar-19 FY Mar-20
NII 40094.86 48243.22 57379.00
EBIT 32624.81 39749.72 45903.13
NET INCOME 17486.75 21078.14 25073.55
EPS 66.80 77.90 91.93
BVPS 409.60 547.89 615.79
ROE 17.87% 16.50% 15.77%
Source: Company's Website, Reuters & Capitaline
• Regulatory norms
Valuation:
Operating performance of the bank remains strong and is doing better
than industry average during current quarter and the management
expects core operating performance continue to be strong. As per the
management, retail assets, insurance and better business mix strategy
would be key drivers of fee. Moreover, it is looking to diversify funding
towards increasing institutional funding as well. Overall, it has increased
focus toward garnering deposits. Thus, it is expected that the stock will
see a price target of Rs.2586 in 8 to 10 months time frame on an one year
average P/Bx of 4.2x and FY20 BVPS of Rs.615.79.
GUJARAT STATE PETRONET LIMITED CMP: 220.05 Target Price: 259 Upside: 18%

VALUE PARAMETERS Investment Rationale:

Face Value (Rs.) 10.00 • Gujarat State Petronet Limited (GSPL) is a natural gas infrastructure
and transmission company engaged in gas transportation business.
52 Week High/Low 225.50/149.15 The company is engaged in transmission of natural gas through
M. Cap (Rs. in Cr.) 12395.02 pipelines on an open access basis from supply points to demand
EPS (Rs.) 15.18
centers. It develops energy transportation infrastructure and connects
natural gas supply sources, including liquefied natural gas (LNG)
P/E Ratio (times) 14.48 terminals to various markets.
P/B Ratio (times) 2.16
• The company reported steady natural gas transmission volume growth
Dividend Yield (%) 0.91
of 4.8% YoY to 38.2 mmscmd (Million Metric Standard Cubic Meter per
Stock Exchange BSE day) led by higher volume offtake from city gas distribution, power and
refining sector. The volume growth is expected to remain stable going
ahead owing to its sole right to transmit re-gasified gas from GSPC -
SHAREHOLDING PATTERN Adani’s 5 mmtpa (Million Metric Tonne Per Annum) LNG Mundra
terminal and expansion of Petronet LNG’s Dahej terminal to
Foreign
17.5mmtpa from 15mmtpa.
17.52 16.00
Ins tu ons
• Also, the government’s focus on clean energy, floundering domestic oil
22.81 Non Promoter Corporate and gas output and internationally cheap availability of natural gas will
37.64 Holding
support higher imports of regassifed-liquefied natural gas (RLNG).
6.04
Promoters Hence, it is expected that there would be a domestic build up in RLNG
capacity and GSPL would get the benefit on account of higher gas
Public & Others transmission volumes and expected upward revision in tariffs.

• The Company is working on future expansion projects based on the

demand in various regions around the gas grid. It is also gearing up its
pipeline by developing connectivity with new terminals that are being
P/E CHART developed in Gujarat to ensure connectivity with all sources in Gujarat.
350.00
It is also authorized to develop the City Gas Distribution (CGD)
Network in the Geographical Area (GA) of Amritsar District (Punjab)
300.00
and Bhatinda GA (Punjab) for which the work has already been started
250.00 by the company.
200.00

150.00
Risk:
100.00
• Lower capacity utilization due to limited availability of gas
50.00 • Reduction in transmission tariffs
13-Apr-15

21-Apr-16

26-Apr-17
18-Feb-15

14-Sep-15

23-Feb-16

26-Sep-16

29-Sep-17
24-Jul-15

10-Jun-16
2-Aug-16

16-Jun-17
8-Aug-17

8-Oct-18
21-Jun-18
26-Dec-14

14-Mar-19
3-Nov-14

9-Nov-15
1-Jan-16

9-Jan-17
5-Sep-14

10-Aug-18

23-Aug-19
2-May-18
4-Jun-15

2-Jul-19
18-Nov-16

2-Mar-17

22-Nov-17
12-Jan-18
8-Mar-18

30-Nov-18
22-Jan-19

10-May-19

11 15 19 24 Close Price
Valuation:

The company has healthy debt equity ratio and ROE is also increasing
gradually. As per the management of the company, transmission
business’s volume growth due to increased LNG capacity, lower gas
FINANCIAL PERFORMANCE (Rs.in Cr.)
prices and the upward revision of transmission tariffs by PNGRB will lead
ACTUAL ESTIMATE to decent profitability. Thus, it is expected that the stock will see a price
target of Rs. 259 in 8 to 10 months time frame on a 3 year average P/Ex of
FY Mar-18 FY Mar-19 FY Mar-20 17 times and FY20E EPS of 15.26.
REVENUE 1331.75 1877.19 2038.03
EBITDA 1147.80 1542.59 1603.08
EBIT 972.76 1362.62 1404.45
PRE-TAX PROFIT 1010.81 1202.78 1284.47
NET INCOME 668.43 794.67 854.34
EPS 11.85 14.09 15.26
BVPS 89.83 101.85 113.80
ROE 13.98% 14.70% 14.04%
Source: Company's Website, Reuters & Capitaline
Above calls are published in “Wise Money Issue No. 700”
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