Sharekhan's research report on HDFC Bank
Despite strong loan growth (~16.9% y-o-y/ 6.2% qoq) and lower credit cost (69bps versus 75 bps qoq), HDFCB earnings were below consensus estimates by ~ 3-4% mainly driven by higher opex growth (up 32.6% y-o-y/ 8.0% qoq). PAT reported at Rs. 12,047 crore up by 19.8% y-o-y/ down 1.7% qoq. Opex growth was higher led by continued accelerated investments in branch expansion (+9% qoq), employee addition (+4% qoq) and higher retail business volumes. Bank is taking benefit of benign credit cost to sustain future growth. Bank guided that loan growth outlook continues to remain strong. There is no slowdown in demand and strong traction in disbursements is seen across the segments. Margins are expected to remain range bound until the loan mix gradually shifts towards retail. Bank likely to sustain RoA in the range of 1.9-2.1% in near to medium term.
Outlook
We remain positive on bank however the near-term focus will continue to be on the regulatory relaxations needed for a smooth transition. Stock trades at 2.8x/2.4x its FY2024E/25E core BV estimates. We maintain our buy rating with an unchanged PT of Rs. 1920.
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