Buy HDFC Bank; target of Rs 1958: Edelweiss

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Edelweiss' research report on HDFC Bank

HDFC Bank’s Q1FY18 PAT of INR38.9bn (up >20% YoY) came lower than our estimate on higher credit cost, while revenue maintained momentum and limited the overall impact. Uncharacteristically, GNPLs rose by 19bps QoQ to 1.24% (still best-in-class), but >60% of the contribution was from agri portfolio (effects of farm loan waiver) which seemingly is non-recurring and slippages should normalise henceforth. Having said that, key highlight was the bank’s continued traction in core operating profitability (up >25% YoY).

Outlook

At CMP, the stock is trading at 3.8x FY19E P/ABV and 20.9x FY19E P/E. We maintain ‘BUY/SO’ with TP of INR1,958 (4.2x FY19E P/ABV).

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