Accumulate HDFC Bank; target of Rs 1934: KR Choksey

KR Choksey's research report on HDFC Bank

Net Interest Income (NII) for Q2FY25 stood at INR 301,139 Mn, a growth of 10.0% YoY/ 0.9% QoQ. NII was in line with our estimates (-0.6% deviation). Pre-Provision Operating Profits (PPOP) grew 8.9% YoY (+3.4% QoQ) to INR 247,057 Mn, with operating income increasing by 9.2% YoY. PPOP was largely in line with our estimates (+1.7 % deviation). The net profit for Q2FY25 stood at INR 168,210 Mn, and there was a growth of 5.3% YoY (+4.0% QoQ), which was led by operating performance. The bank's strategic focus on expanding its retail credit portfolio, particularly in mortgages, alongside controlled credit costs and low NPAs, positions it well for future growth despite facing near-term challenges like rising deposit costs.

Outlook

We have assigned an Adj P/B multiple of 2.4x (earlier 2.2x) on the FY26E Adj Book value for the core banking business and subsidiaries value of INR 230 per share, resulting in a target price of INR 1,934 per share (earlier INR 1,860), an upside of 11.9% over the CMP. We have maintained our “ACCUMULATE” rating on the shares of HDFC Bank Ltd.

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