Research on International Stock Ideas, Value Punks

Value Punks

Research on International Stock Ideas

Value Punks’ mission is to deliver institutional-grade research on international stock ideas in a digestible, reader-friendly format.

At Value Punks, we blend our background in traditional value-investing with an openness to embrace a constantly and rapidly evolving investment and business landscape.

Institutional-Grade Research

Equity Bottom-Up

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HDFC Bank is India’s largest private bank. The stock has been a tremendous compounder. Despite having always looked ‘expensive’, it has rewarded shareholders with a CAGR of 21.4% over the last 20 years (in USD). HDFC Bank is an option on India’s GDP growth and financialization.   
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We find that the most important factor one needs to possess to own any stock, but especially a banking business in an emerging market trading for premium to book value, is conviction. With this in mind, we’ll explain why we believe HDFC is a rock-solid banking business by deconstructing the key elements of a bank business model. 
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We acknowledge that a bank can be a bit of a black box, which is why it’s important for investors to have confidence in not only a bank’s business, but also its culture and management. HDFC Bank has a strong track record of navigating economic cycles through prudent risk management. 
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HDFC Bank is India’s largest private bank. The stock has been a tremendous compounder. Despite having always looked ‘expensive’, it has rewarded shareholders with a CAGR of 21.4% over the last 20 years (in USD). HDFC Bank is an option on India’s GDP growth and financialization.   


We find that the most important factor one needs to possess to own any stock, but especially a banking business in an emerging market trading for premium to book value, is conviction. With this in mind, we’ll explain why we believe HDFC is a rock-solid banking business by deconstructing the key elements of a bank business model. 




We acknowledge that a bank can be a bit of a black box, which is why it’s important for investors to have confidence in not only a bank’s business, but also its culture and management. HDFC Bank has a strong track record of navigating economic cycles through prudent risk management. 



Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

Creating Wealth through Alpha and Compounding

Yellowstone Equity

Providing unbiased and independent research on Indian equities to global institutions and individual investors


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Regulatory Disclosure: 
Note that Ankit Agrawal (Proprietor of Yellowstone Equity) is a SEBI registered Research Analyst (Registration No.: INH000007216). Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Research Analyst Contact Details:
Address: A-412, Shilp Aaron, Sindhu Bhavan Road, Ahmedabad, Gujarat - 380059
Email: services@yellowstoneequity.com
Mobile: +91-7575817289

Compliance/Grievance Officer:
Name: Ankit Agrawal
Email: services@yellowstoneequity.com
Mobile: +91-7575817289
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<a href="https://www.smartkarma.com/entities/hdfc-bank-ltd-4b6b7a92-9087-468d-9dbe-ab169e77f014" target="_blank" data-smartkarma-citation="entities:558:1" rel="noopener">HDFC Bank (HDFCB IN)</a> is pivoting itself to embrace new age digital banking processes. It has been revamping its back-end and front-end technology infrastructure to enable this. </li>
<li>It has been also partnering with the fintech ecosystem to enhance its reach. With fintechs as distributors, we think the value of back-end underwriting capabilities have grown all the more.</li>
<li>We think technology has potential to significantly catalyze HDFC Bank’s growth over the next 3-5Y, to the extent that it may even outgrow its last 3Y growth.</li>
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HDFC Bank (HDFCB IN) is pivoting itself to embrace new age digital banking processes. It has been revamping its back-end and front-end technology infrastructure to enable this. 
It has been also partnering with the fintech ecosystem to enhance its reach. With fintechs as distributors, we think the value of back-end underwriting capabilities have grown all the more.
We think technology has potential to significantly catalyze HDFC Bank’s growth over the next 3-5Y, to the extent that it may even outgrow its last 3Y growth.


HDFC BANK: Undergoing Digital Transformation - Fintech to Catalyze Growth, Not Disrupt It

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Sapphire Foods Limited (SFL), one of Yum Brand’s franchisee in the Indian subcontinent, aims to raise around US$280m via its Indian IPO. Its core business is to operate KFC, Pizza Hut and Taco Bell in the Indian subcontinent.In this note we will talk about the company's background and past performance

Sapphire Foods Limited (SFL), one of Yum Brand’s franchisee in the Indian subcontinent, aims to raise around US$280m via its Indian IPO. Its core business is to operate KFC, Pizza Hut and Taco Bell in the Indian subcontinent.In this note we will talk about the company's background and past performance

Sapphire Foods IPO - Delivery Growing, Stores Shrinking

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Ignoring Credit Deterioration, Results Improve: HDFC Ltd (HDFC.IN) [HDFC] reported FY 2Q22 results of INR 37.3 bn, increasing INR 9.8 bn (35.5%) linked quarter basis. HDFC witnessed positive operating jaws; a massive linked quarter increase in dividends; robust loan growth; a drop in loss provisions; and a lower tax rate. Nothing like pulling on every earnings lever to achieve the result you want; and*Credit Quality Worsens: Given the INR 3.8 bn in net recovery during FY 2Q22, net new NPLs accelerated to INR 22.1 bn and increased 51.1% on an annualized basis. We also find that HDFC’s reserve still needs shoring up by another INR 200 bn or over a year of PBT.

*Ignoring Credit Deterioration, Results Improve: HDFC Ltd (HDFC.IN) [HDFC] reported FY 2Q22 results of INR 37.3 bn, increasing INR 9.8 bn (35.5%) linked quarter basis. HDFC witnessed positive operating jaws; a massive linked quarter increase in dividends; robust loan growth; a drop in loss provisions; and a lower tax rate. Nothing like pulling on every earnings lever to achieve the result you want; and*Credit Quality Worsens: Given the INR 3.8 bn in net recovery during FY 2Q22, net new NPLs accelerated to INR 22.1 bn and increased 51.1% on an annualized basis. We also find that HDFC’s reserve still needs shoring up by another INR 200 bn or over a year of PBT.  

*Not Fooling Anyone: HDFC Bank (HDFCB.IN) [HDFCB] released a nonsensical set of FY 2Q22 earnings results, despite exhibiting that the bottom-line improved INR 11.0 bn (14.3%) linked quarter. On an operating basis, core results aggregated INR 81.6 bn, up INR 10.3 bn (14.5%) over the period. Puzzling is the INR 75.1 bn (28.5%) increase in problem loans, and the INR 9.1 bn (18.8%) decline in loss provisions during FY 2Q22; and *Credit Disaster Continues:We calculate that net new NPLs actually increased a whopping INR 114.1 bn or 43.2%. By our calculation, reserves are massively short by nearly INR 371.3 bn or over year (and growing) of core operating results – despite the massive under-providing against credit this quarter which suggests that the provision shortfall is closer to two years of results.

*Not Fooling Anyone: HDFC Bank (HDFCB.IN) [HDFCB] released a nonsensical set of FY 2Q22 earnings results, despite exhibiting that the bottom-line improved INR 11.0 bn (14.3%) linked quarter. On an operating basis, core results aggregated INR 81.6 bn, up INR 10.3 bn (14.5%) over the period. Puzzling is the INR 75.1 bn (28.5%) increase in problem loans, and the INR 9.1 bn (18.8%) decline in loss provisions during FY 2Q22; and *Credit Disaster Continues:We calculate that net new NPLs actually increased a whopping INR 114.1 bn or 43.2%. By our calculation, reserves are massively short by nearly INR 371.3 bn or over year (and growing) of core operating results – despite the massive under-providing against credit this quarter which suggests that the provision shortfall is closer to two years of results.  

India

HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.

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HDFC Bank (ADR) (HDB US)

Deep Dive: HDFC Bank (HDB US)

We are kicking off with our first deep dive post this year on HDFC Bank - India’s largest private bank. In this post, we provide a contextual...

Value Punks

HDFC BANK: Undergoing Digital Transformation - Fintech to Catalyze Growth, Not Disrupt It

HDFC Bank is undergoing major digital transformation to gear up for the next phase of growth catalyzed by increased adoption of technology.

Ankit Agrawal, CFA

Sapphire Foods IPO - Delivery Growing, Stores Shrinking

Sapphire Foods Limited, one of Yum Brand’s franchisee in the Indian subcontinent, aims to raise around US$280m in its Indian IPO. It operates KFC,...

Sumeet Singh

HDFC Ltd. – In the Land of The Blind

HDFC: HDFC reported a QOQ FY 2Q22 results increase of 35.5%, as management pulled on every earnings lever. Net new NPLs increased 51.1% annualized,...

Thomas J. Monaco

HDFC Bank – Extending & Pretending

HDFC BANK: HDFCB released a nonsensical set of FY 2Q22 operating basis, which exhibited improvement of 14.5% QOQ. Puzzling is the 28.5% increase in...

Thomas J. Monaco

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