Buy HDFC Bank; target of Rs 2000: Emkay Global Financial

Emkay Global Financial's research report on HDFC Bank

HDFC Bank reported a 3% PAT beat at Rs168bn/1.9% RoA, primarily due to stable margins, contained opex, and provisions (due to reversal of Rs6.8bn AIF provisions). After an upset in 1Q, deposit growth returned – up 15% YoY/5% QoQ (Rs1.2trn), but credit growth fell to a low of 7% YoY as the bank focused on LDR management (down by 375bps QoQ to 100%) to allay regulatory concerns. However, the bank managed to maintain NIMs at 3.65% owing to better portfolio mix, defying the industry trend. Asset quality also held up well with GNPA ratio largely flat at 1.36% vs far more deterioration for peers, as the bank consciously contained growth in unsecured loans for the past few years.

Outlook

We retain BUY with TP of Rs2,000 based on 2.4x Sep-26E Standalone Bank ABV and subs valuations (Rs300/sh). Bank has received board approval to launch an IPO of its NBFC subsidiary – HDB Financial Services amounting to Rs125bn (incl OFS of Rs100bn) – to meet the regulatory guidelines and also unlock value.

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