Buy HDFC Bank; target of Rs 1800: Sharekhan

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Sharekhan's research report on HDFC Bank

HDFC Bank reported steady numbers in Q2FY23 with a PAT of Rs. 10,606 crore (up 20.1% y-o-y/ 15.3% q-o-q) which was broadly in line with consensus and our estimates led by strong NII growth and lower credit cost. Net interest income (NII) grew robustly by 18.9% y-o-y / 7.9% q-o-q driven by healthy net advances growth of 23.4% y-o-y/ 6.1% QoQ along with improvement in NIMs (cal.) by 20 bps qoq to 4.1%. Operating Profits (PPoP) grew by 10% y-o-y /13.2% q-o-q. Slippages stood at Rs. 5,700 crore down 21% QoQ. Core Credit cost stood at 83 bps versus 92 bps last quarter. GNPA/NNPA ratio`s improved marginally by 5bps/2bps qoq reported at 1.23%/0.33%. PCR remained stable at ~73%, while restructured book stood at Rs. 7,851 crore (0.53% of loans versus 0.76% in last quarter).

Outlook

We expect HDFC Bank to deliver ~18.5% PAT CAGR over FY22-24, with a RoA/RoE of 1.9%/16.8% in FY24E. Stock trades at 2.7x and 2.3x its FY2023E and FY2024E core BV. We maintain Buy with an unchanged PT of Rs. 1800.

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HDFC Bank - 171022 - khan