Accumulate HDFC Bank; target of Rs 2550: Dolat Capital

Dolat Capital's research report on HDFC Bank

HDFC bank reported a healthy quarter with a profit growth of 23% YoY contributed by 1) a stellar asset quality and credit costs and 2) steady NIMs. The bank’s asset quality improved 2 bps to 1.36%, likely to have been aided by waning stress in agriculture portfolio. Advances for the bank grew 25% and deposits at 17% YoY. We believe the bank is expected to continue to grow at CAGR 25% and improve its return metrics on the back of lower credit costs. We continue to like the franchise and the banks is likely to remain better placed on the key constraints facing the segment i.e. resource mobilization especially via deposits. Maintain Accumulate, valuing the bank at FY21E P/ABV 3.6x.

Outlook

We maintain our estimates - factored an Advance and PAT CAGR of 25% and 25% over FY19-20E with an improving NIM profile and lower credit costs aiding an improved RoA at ~2.0%.