Buy HDFC Bank; target of Rs 1830: YES Securities

YES Securities' research report on HDFC Bank

While management stopped short of providing margin guidance, they conceded some of the sequential expansion was transient: Management stated that there is a lead-lag effect in terms of rise in loan and deposit interest rates, leading to expansion in margin. On the other hand, they also added that retail lending, which is higher-margin than wholesale lending, has picked up for the bank over a period of time. Furthermore, the penetration of the customer base in terms of term deposits is just 14-15%, which implies that HDFCB may not have to woo rate-shoppers with unduly high TD rates

Outlook

We reiterate BUY rating on HDFCB with a revised price target of Rs 1830: We value the standalone bank at 2.7x FY24 P/BV for an FY23E/24E/25E RoE profile of 14.4/14.5/15.4%. We assign a value of Rs 229 per share to the subsidiaries, on SOTP.