Prabhudas Lilladher recommended accumulate rating on HDFC with a target price of Rs 2270 in its research report dated August 03, 2019.
Prabhudas Lilladher's research report on HDFC
HDFC's Q1FY20 earnings with PAT at Rs32bn up 46% YoY was largely supported by subsidiary stake sale gains (Rs18.9bn) and income on subsidiary investments. The quarter saw steady NIMS at 3.3% although non-individual spreads shrunk moderately. As corporate portfolio slackens, the overall loans stood sluggish at 13% YoY growth as against PL expectation of 15%; said that, individual loan traction stood upbeat at 17% YoY. While HDFC's credit risk profile stands robust, Q1FY20 saw moderate asset quality deterioration reflective of macro slowdown. GNPA at 1.29% stood higher than expectations of 1.2%, ECL provisioning climbed to 1.55% from 1.44% in Q4FY19. As macro headwinds play out, the margin-NPA maintenance conundrum has come to fore. While HDFC maintains competitive superiority the spreads should stand maintained, however, GNPA and loan traction (15%) should see slight downward pressures for FY20.
Against this backdrop, we trim our core book multiple to 2.6x (earlier 2.7x) arriving at TP of Rs2,270 (earlier Rs 2,274) at Mar-21 PABV. Downgrade to ACCUMULATE.
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