Buy HDFC Bank; target of Rs 1950: Motilal Oswal

Motilal Oswal's research report on HDFC Bank

HDFCB reported an in-line quarter. PAT was up 20% YoY, supported by a healthy NII growth and lower provisions. NIMs stood stable QoQ. PPoP and Core PPoP growth remained modest at ~14% YoY each. Strong demand for Commercial and Rural Banking, and Agriculture, Corporate and retail loans led to a healthy QoQ growth in the loan portfolio. Deposits also showed strong traction. Asset quality ratios improved as slippages moderated to INR49b. The restructured book declined to 31bp of loans (v/s 42bp in 3QFY23). PCR improved to ~76%, which coupled with a contingent provision buffer (61bp of loans) should support asset quality. We uphold our earnings projection and estimate a ~19% PAT CAGR over FY23-25, with RoA/RoE at 2.0%/17.7% in FY25. A potential pick up in margins and progress on the merger would be the key monitorables. We reiterate our Buy on the stock.

Outlook

We reiterate our Buy rating with a TP of INR1,950 (premised on 3.0x Sep’24E ABV). A potential pick up on the margins and progress on the merger would be the key monitorables.

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