This bank provides financial products and services to individuals and businesses in India, as well as in Bahrain and Hong Kong.
HDFC Bank (HDB)
from Cabot Top Ten Trader
HDFC Bank (HDB) is the largest private-sector bank in India by market cap, and its fortunes are closely tied to the health of that market. The company has a nice mix of retail banking, wholesale banking and treasury operations, with wholesale banking supplying about one-third of revenue, retail banking kicking in 16%, auto loans 14% and commercial auto and construction equipment financing 11%, the same contribution as personal loans and credit cards.
The growth of the Indian economy is providing plenty of organic growth for HDFC Bank, with the company’s 2013 report on February 24 revealing a 17% increase in revenue, the third straight year of double-digit revenue growth. The company’s Q4 results showed a small increase in revenue, but a multi-year high of 18.3% in after-tax profit margin. HDFC has had the benefit of stable leadership, with one man at the head of the company since its founding in 1994, when India first allowed private banks to do business.
The longer-term story is that India’s financial infrastructure has long lagged behind Western models, with limited access to credit cards, personal loans, auto loans and other banking services.
HDFC Bank is leading the development of stronger banking services that both benefit from and support economic growth. With a network of 3,336 branches and 11,473 ATMs in 2,100 Indian cities and towns, HDFC Bank is positioned to grow as India does. A small dividend is a nice addition.
After hitting a multi-year high at 44 in May 2013, HDB took a nearly four-month flop to 27. A recovery to 37 at the end of October led to a four-month rebasing pattern under resistance at 36. So when the stock broke out in early March, it had a good base to support its run, which topped 40 in early April. HDB looks like it may need to rest for a while with 40 as support. Any dip of a point or so looks buyable. Use a loose stop at the 200-day (now just over 34), as this stock is a long-term play on India’s strength.
Suggested Buy Range: 38-40.5
Suggested Loss Limit: 33-34
Michael Cintolo, Cabot Top Ten Trader, www.cabot.net, 978-745-5532,
April 14, 2014