Buy HDFC Bank; target of Rs 2025: Prabhudas Lilladher

Prabhudas Lilladher's research report on HDFC Bank

HDFCB saw good quarter; NIM was 4bps higher to PLe at 3.66% and core PPoP was a 2.9% beat owing to better fees. Loan growth at 5.0% QoQ was broad based led by CRB/agri/retail/corporate. Asset quality was stable with GNPA at 1.34% (-6bps QoQ) and controlled net slippages. While NIM was affected (-37bps QoQ) by surplus liquidity, we believe margins have bottomed out as excess cash has already been drawn down which should normalize NIM in H2FY24E. Moreover, as high cost liabilities of HDFCL are replaced, NIM should enhance over FY24-26E from 3.57% to 3.72%. Due to higher fees/lower taxes we raise FY24E core PAT by ~3%, although FY25/26E earnings remain unchanged. With core RoA of 1.74% and likely core PAT CAGR of ~19% over FY24-26E, HDFCB remains our preferred pick among large-caps.

Outlook

We maintain multiple at 2.8x on Sep’25E core ABV and TP at Rs2,025. Retain ‘BUY’.

For all recommendations report, click here